4 ways to fix an unsteady cash flow
By Georgie Miller
When I was still a student, I was pretty much broke all the time. I didn't mind too much though. I knew that when I graduated and got a "real job," my money worries would be over. Right?
But even after I found a great job with a decent salary, I noticed something weird. At certain times of the month, my checking account was overflowing. There was a couple thousand dollars in there! Other times, I would have less than $100, prompting me to worry about what would happen if a check cleared my account a day earlier than I expected.
Feast or famine
Why was this happening? I had added up my monthly spending repeatedly and came out in the black. Then one day I was putting the due dates for my bills on my calendar, and I noticed something.
The first of my two student loan payments was deducted from my account on the 28th. The second was deducted on the first. My rent was also due on the first. And the credit card that I used for my monthly spending was due on the 29th.
In other words, more than 75 percent of my spending occurred during the same one-week period every month. No wonder I was broke around that time! If you are finding yourself in a monthly cycle of rich one minute, poor the next, here are some strategies to better manage your cash flow.
1. Pay off a debt
Having two student loan payments back-to-back was a budget buster. However, one of the loans had a significantly lower balance than the other. I made extra payments on that loan whenever I could. Six months later, I had paid it off entirely. Having that payment off my plate not only reduced my total monthly commitments, but also freed up some extra cash during the time of the month I needed it most.
2. Keep part of your emergency fund in your checking account
Although I had an emergency fund, it was in high-interest savings accounts. But I wasn't earning enough in interest to make up for the anxiety produced by my cash flow problems. So I took $500 from my emergency fund and put it in the checking account. I pretended it wasn't there most of the time, but having that extra cushion meant that I could breathe easier if two or three bills were due in the same week.
3. Transfer your balance to a card with a more convenient due date
Since I paid off my credit card each month, this one didn't apply to me. But had I been carrying a balance on my card, I would have investigated a zero percent balance transfer to a card with a more convenient due date. If this option appeals to you, be sure to talk to a customer service representative about selecting a due date that suits your budget when you open your new card. In addition to helping your cash flow problem, the zero-percent part of the equation can help more of each month's payment go toward paying off your debt. Win-win!
4. Contact your account servicers about changing your due dates
Maybe a balance transfer isn't an option for you. Or perhaps you conducted a balance transfer before realizing that the new due date would be such a major inconvenience. All is not lost! Even if you're account isn't new, you can still contact your issuer to ask for a different due date. True, this may require you to spend an hour on hold listening to bad elevator music. But won't it be worth the peace of mind you'll have going forward?
If you consistently run out of money at the same time every month, don't assume that overspending is necessarily the culprit. Whip out a calendar and see when your bills fall due. If cash flow woes are the issue, these strategies may take some of the pressure off your budget.