If one of your resolutions for 2022 is to gain more control of your finances, it may be time to adopt cash flow forecasting. Most of us are aware of monthly budgeting – whether we stick to it is another story. Cash flow forecasting, then, can be understood as, essentially, supercharged budgeting.
Review past habits
To get started with your personal cash flow forecasts, you’ll need to review your income and expenses over the past, say, 3-6 months. Pay attention to everything from how often you bought yourself a small treat to your larger monthly expenses as well as where and how you were saving both large and small amounts.
Review predictions for 2022
Are you starting a side hustle? Have you just been made redundant? Are you moving or expecting your first child? Make note of all the known factors that can and will impact your finances going into this year. Also make note of when abouts these changes will likely take effect.
Collate past and predictions
Use your reviewed past behaviours to predict your spending and saving habits for the next 3-6 months, taking into account all your noted established predictions and changes for 2022. This will then give you a clear picture of not only your current financial state and future goals and realities, but when, where, and how you might need to adapt (past) habits in order to meet specific goals or make preparations ahead of time to navigate potential future knocks.
Cash flow forecasting can, thus, help you to block out a viable future-orientated outlook of the next 3-6-month segment and then better align your monthly budget to those greater realities. This can make sticking to your budget a whole lot easier, which means you’ll change bad habits faster and reach your financial goals sooner.