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Section 3: Manage Your Cash
We all have heard the adage about money "it is not what you make, but what you keep." If you consistently spend
less than you make, then you set in motion a positive cycle of events - you generate surplus cash flow which you
can put in the bank, use to pay down your debts, or invest. If you consistently spend more than you make, you
set in motion a negative cycle of events - you draw down your bank accounts, borrow excessively, and incur
ever-increasing finance charges - which leads to financial distress.
The key to avoiding (or exiting) the path to financial distress is effective cash management, the process by
which you develop an expense budget and track your spending against that budget. Let's be completely frank -
you will not find budgeting on anyone's "Top 10" list of enjoyable life experiences. It does take some time to
do it correctly, and no one wants to be sitting inside reviewing numbers when the sun is shining. However, it
is a very important exercise, a "necessary evil" of sorts. So our objective is to help you develop a simple yet
robust budget in the shortest possible time.
You will create your own budget by following the process outlined in Step 3.1 through Step 3.5. In Step 3.6, we
will show you how to track your income and expenses against this budget to keep heading in the right direction.
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