Personal Cashflow Management ..

You might be in a quandary about how to invest, when to invest, with whom to invest and even question why to invest. You might invest hours of time researching managers, mutual funds, stocks or alternative opportunities, interviewing advisers, and calculating the impact of return on your wealth. These are all worthy endeavors; meaningful and important. These activities absorb a great deal of energy and focus, but the fact is, you might be looking in the wrong direction. What matters is your Cashflow ; As without proper CashFlow management, you are going to face liquidity crisis !

What is cash flow? It's basically the movement of funds in and out of your business. You should be tracking this either weekly, monthly or quarterly. There are essentially two kinds of cash flows:

• Positive cash flow: This occurs when the cash funneling into your business from sales, accounts receivable, etc. is more than the amount of the cash leaving your businesses through accounts payable, monthly expenses, salaries, etc.
• Negative cash flow: This occurs when your outflow of cash is greater than your incoming cash. This generally spells trouble for a business, but there are steps you can take to remedy the situation and generate or collect more cash while maintaining or cutting expenses.

The flow in cash flow refers to the in and out motion of money. Those who simply earn income and pay bills are not engaged in the process of cash flow management, that’s survival. Real cash flow management involves understanding the components that make up where the money comes from, where it goes, and what choices are appropriate in creating a life of greater satisfaction. It is an active process.

Some of these components include:
Components of Income
Fixed Expenses
Discretionary Expenses
Taxes
Savings

This is mainly to do with the inflow and the outflow of money. To put simply, inflows refers to the money that’s earned while outflows refer to the expenses. To list a few examples:

Inflows:
Salary/Business Income
Rental income
Interest/Dividend Income

Outflows:
Regular living expenses
Rental payouts – if any
Other Discretionary expenses
Annual tax and insurance payments

Below are some aspects that need to be kept in mind to manage cashflows:

Budgeting: It allows estimating the quantum of surplus that gets generated periodically which could be monthly or annually as the case may be. In case of reduced surplus generation, cashflow may be managed by either reducing expenses or increasing income. To reduce expenses, first identify and classify the expenses as fixed or discretionary. Expenses that are typically made by choice are discretionary expenses that include vacationing, weekly outing, etc. These expenses are easier to cut down and do not call for any structural lifestyle changes to see a positive impact. For example, a holiday in India would work out more cost effective than spending on an international holiday. This category of expense has a higher potential of displaying positive impact on cashflows without having to make any major changes in lifestyle as compared to essential expenses.

Build Corpus: It’s good to maintain an emergency corpus that provides immediate liquidity as required. There is no strict rule on how much the corpus should be but ideally it should be maintained to meet your 4 to 6 months of expenses. If you like to shop and tend to make unplanned purchases, it’s a good idea to either step up your corpus or have a separate fund for that.

Equated Monthly Installments: While purchasing a property, the first priority is always to accumulate for the lumpsum down payments. While most forget that the regular EMI outflow that gets paid each month has an impact on cashflow either today or in future. It’s very important to treat these committed expenses in a holistic manner to ensure that reduced savings today do not have an impact on other critical goals planned for the future.

Investment Planning: Once the goals are chalked out and the monthly savings identified; the next important aspect is to identify the right investment avenues. Apart from strategizing the investments based on asset allocations another important aspect that needs to be considered is the required investment duration to ensure the required amount is available as needed. Certain investments define a fixed timeline as in case of a PPF a/c where as there is no such lock in period for equity investments. However to be able to generate most from this class of investment, it is best to consider these from a long term perspective. Investment timeline should ideally be looked at in conjunction with goals to match the liquidity requirements. Some people may not have saved as much as they would have wished. This is not because they did not intent to save but because they did not manage their cashflow well. It is important to set a system keeping the above in mind. A good investment plan is always preceded by good cashflow management.

ref:

http://www.investopedia.com/exam-guide/cfp/financial-statements/cfp5.asp

http://www.inc.com/encyclopedia/cashflow.html

http://www.accenture.com/Microsites/vaahini/potpourri/moneywise/Pages/your-cash-flow.aspx

http://www.forbes.com/sites/moneybuilder/2010/12/13/how-to-manage-your-personal-cash-flow

Things to consider before launching Your Own Business while keeping day job ..

ref: 

• http://www.entrepreneur.com/article/245763 
• http://www.entrepreneur.com/article/228183
• http://www.entrepreneur.com/article/225937
• http://www.entrepreneur.com/article/246755

1. Consider your job in the right light
    No matter what kind of job you have, make sure you consider it as a blessing, not a curse. It isn’t holding you back, it’s keeping you afloat. 

2. Plan your days well
    It’s the little, consistent daily things you do that add up to make or break a startup. Stop the busywork, get rid of distractions and give both your job and your venture the laser focused attention they deserve.

3. Maximize your time
    You have the same hours as the PrimeMinister of India. Maybe you already know your job takes up 40 hours of your time each week, so account for it and figure out how to maximize all those other remaining hours. Sleep should still be a priority, as should some daily exercise. Still, there are 72 hours(40hours left in workdays and 32hours in the weekend) in a week to do with as you wish beyond your 40 hours of work, so spend them smartly. Successful entrepreneurs manage their time, they don’t wish for more of it.

4. Make sure this is really what you want
    Is this going to make me happier? Before leaving your job for uncharted territory, make sure this is really what you want – not just what you think you want or a way to escape your current job.“Too many people suffer silently in their job, but before you go out to be your own boss, you have to believe you're going to be happier. If you can't say that you believe it will make you happier, don't do it.”

5. Practice your dream
    Test the waters without giving up my current job. 'Beta Test' their dream job before leaving a stable situation to pursue it full-time. You might find you don't like the new career as much as you thought you would. “Before you quit your accounting job to open a coffee shop, it might be good to work at a Starbucks part-time for six months to see if you hate coffee and humans,” .. 

6. Get a second opinion.
    Even the most level-headed entrepreneurs should ask for a second opinion before moving forward. You might also tap a trusted colleague or friend for an opinion. Have someone(a devil's advocate) who you trust take a look at your financial projections to ensure you're not being overly optimistic.

7. Outsource, outsource, outsource
    You know what your time is worth (if you don’t, calculate it!). Could you hire someone to do it better, faster and, ultimately, break even or make more money during that time? If so, do it.