How to Weather Cash Flow Problems

Few things are worse than being caught short by an unexpected expense.

I know how that feels.

I’ve experienced my fair share of cash flow challenges—both as a freelancer and when I worked in commission sales.

Over the years, I eventually learned what I needed to do to avoid cash flow problems, especially when my income varied from month to month!

Learning these lessons has had huge implications for my financial health (and probably my physical and mental health too!).

Here are the three things that helped me with cash flow the most:

1) Pay yourself a fixed amount every month

Before, I used to pay myself whatever I brought in each month. Inevitably, I’d end up spending more than I should during lucrative months and getting caught short on tight months.

Paying yourself a fixed amount every month builds discipline. It forces to you pay attention to your spending—and plan carefully.

That doesn’t mean you have to live your life as a pauper! You can give yourself a raise when you can afford it and the time is right.

2) Build a reserve of one month’s income

Having a cash reserve of one month’s income can give you a lot of peace of mind.

Compiling this cash reserve won’t happen overnight. It will take time.

Maybe you can come up with a few hundred bucks now. Then, every month—after you’ve paid yourself, your taxes and covered your expenses—you can put a little bit more aside.

Before you know it, you’ll have one month’s income tucked away.

But don’t stop there! Continue to build that financial buffer.

Because there’s nothing more powerful than having a one-, two- or three-month financial cushion to give yourself the freedom to do things like fire a client or invest in yourself.

3) Keep a spreadsheet of expected payments

Many of us already track the work we’ve booked.

But you should also track when payments are due to come in.

Having this in a spreadsheet helps you keep on top of payments and spot potential problems before they happen.

It will also help you with your planning.

Cash Flow Management Takes Effort

Unless you take control of it, cash flow will always be an issue—whether you’re making $1,000 a month or $6,000.

But by putting a few simple practices in place, such as paying yourself a fixed “salary,” building a financial reserve, and tracking incoming payments, you CAN get it under control.


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