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That means working on a consistent basis to keep your personal finance house in order. You say really, how do I go about doing this? There are many ways for you to keep your own personal finances in order. Here are some tips on how you can go about doing this:

1) Create a personal finance budget for yourself and your family if you have one. You can do this by categorizing how your money is spent such as; rent, mortgage, food, entertainment, utilities, credit and debit card expenditures, savings, income, travel, etc… You get the idea. Just categorize your budget with what makes you comfortable. You may also want to utilize a software program to assist you with the budget you create. You may want to consider a software program that has a spreadsheet. By the way, you may want to do your budget on a monthly basis. Your budget should assist you in determining where your money actually goes!

2) By all means get your credit report and credit score! You may want consider running your credit report on an annual basis. Did you know that you’re entitled to a free copy of your credit report from each of the credit bureaus(Equifax,TransUnion,Experian) every year? You can secure a copy of your credit report by going through www.annualcreditreport.com. So, go ahead and order your credit report so you can check it for accuracy. If you have any problems with your report, you’ll need to contact the particular credit bureau directly. The contact information will be provided when you’ve secured a copy of your credit report. By the way, you’ll have to pay a few dollars extra to get your credit score separately from the credit bureaus. But, it’s well worth it, to know how your credit is being scored for your overall credit.

3) Work on determining from your budget and credit report what problems you may have with your finances. These tools should assist you in what you need to do to improve or maintain your finances. It’s like a snapshot of where your money is going. So you don’t have to ask the question, where did all of my money go?

4) Consider working on adding if you haven’t already done so, savings to your budget. You may be saying, I barely have enough to make ends meet, how can I save money? Well, you can! Just say yes you can to yourself. A good way to start is by saving your change. That’s right just start by saving your change. You’d be surprised the amount of money you can save by doing this. You can also, set aside a certain amount of money on weekly, biweekly or monthly basis that you’d like to save. Make the amount of money you save realistic, so you can stick to your savings plan.

5) Set future financial projections for where you want to be with your budget in say one to five years. You may want to consider doing this to achieve your possible short and long term goals. For example, if you decide that you want to purchase a home in two to three years, a future financial budget projection may assist you in knowing how much money you need to save to achieve this goal. Or, maybe you plan to retire in five years, again your future budget projection may assist you with this plan.

6) Take a closer look at your credit and debit card expenses in order to assist you in tracking how you are spending your money. This may help you determine if you’re spending too much money in certain areas if you’re trying to save.

7) Check to see if your financial house is in order in reference to your insurance such as; vehicle insurance, medical insurance, rental insurance, homeowners insurance, life insurance, disability insurance etc… Make sure you have the insurance you need for yourself and your family. You may want to consider doing an annual check-up on your insurance, before the renewal due dates. This will give you the opportunity to reassess the insurance you currently have. You’ll be glad that you did!

So, now you have it! That’s what doing your personal finance homework means. You should be on your way to getting a handle on your personal finances if you have not already done so. You’ll be better prepared to manage your finances.

Nocita Carter is a writer and web designer that creates websites providing informative tips on various subject matter including personal finance tips on your personal finances at http://www.personal-finance-tips-for-you.com ; dating tips at http://www.mydating-tips.com and your choice of ebooks at http://www.ebook-corner-for-you.com

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Ideally, what comes in does not necessary all go out to creditors. Unfortunately, most of us know, that is one of our better dreams. Sometimes we find all our dreams shattered completely. Would you be prepared?

Once upon a time, I was living the ideal life. I had an excellent paying job. Who had to worry about finances or budgets? Ha! Not me. In fact, I never really paid much attention to price tags. I just knew I wanted it so I bought it. I had money in the bank, a nice car and a swell cushy condo.

But, in a blink of an eye, my dream life turned into a nightmare and I was totally unprepared. It was very frightening and intimidating to realize I had to do something drastic. Consequently, I had to learn quick, fast and in a hurry how to reduce my debts and budget my money or I would literally be out in the street.

Health problems forced me to give up my wonderful job and every luxury that went with it. My savings dwindled and I went from riches to rags faster than greased lightning. The shame of it all, what would my family and friends think? Oh poor me. What did I ever do to deserve this? This is so not fair!

Turns out, I was my own worse enemy. My family still loves and supports me and my friends are still my friends. As soon as I stopped feeling sorry for myself, I resigned myself to the fact that this is the way it was going to be, nothing in the world was going to change it and I had better learn to live with it. Don’t misunderstand me, it took quite awhile to get to that point, but the point is I’m there and I didn’t fall off the face of the earth. I still enjoy life, my illness is not terminal, I’m just on a darn ol budget. Grumble, grumble.

Sound familiar? You see my friends, you are not alone. Hopefully you will accept the fact, sooner than I; you have absolutely nothing to be ashamed of. Many, many families find themselves in the same boat. So come on, put on your life jackets and let’s row, row, row!

If you’ve lost your job, there is, of course, unemployment. And, depending on your circumstances, there are state and county agencies that offer additional benefits especially if you have children. It would be advantageous for you to investigate the possibilities. You may qualify for assistance such as; locating a job, temporary financial assistance, health care, food stamps, clothing banks, shelter and transportation.

Perhaps you’ve been spending more than you make and you find yourself in a serious financial situation. Let me share with you some of the ways you may be able to achieve some financial stability.

Obviously, you need to set up a spending plan or budget. But at this point, it will be of no value if you are robbing Peter to pay Paul.

First and foremost you need to reduce your debt and establish ways to save money. Once you’ve gotten your expenses inline, then develop a viable budget. You must discipline yourself to stick to it or you will find yourself without that life jacket and no boat to row, row, row.

You’ll need to do two things. Find some extra cash and reduce your debts. Here are some suggestions to help you achieve both. At the same time, you will be setting the ground work for your new budget.

Ways to obtain cash:
Have a garage or yard sale. I was amazed at the amount of money I pulled in.
You might want to look for a second job. I know, I know. What a yukky idea. But look on the bright side, it’s just until the crisis is over.

Sell that extra car.

Ways to reduce your expenses:
Refinance your home at a lower rate to reduce your mortgage payment. But do it now because the word on the street is that the Fed is going to increase the interest rate again!

Increase your insurance deductibles. Then shop around for better rates for your homeowners, auto, life and health insurances.
Stop eating out and prepare your dinners at home.
Start taking your lunch to work instead of buying it.

Shop with a grocery list and stick to it. Make your list using your grocery flyer and prepare your meals based on the specials. Take advantage of buy one, get one free offers. Be diligent and don’t buy what you really don’t need. Use coupons - most stores offer double the value. Buy store brands. Hey, don’t shake your head. I save plenty that way! If I, the once upon a time little princess, can do it so can you.
Cancel your memberships and magazine subscriptions. Instead of going to the gym, take walks, exercise at home. Take trips to your local library for magazines, newspapers and books.
Stay home instead of going out for entertainment. Curl up with a good book from the library and rent movies instead of going out to the movie theatre. Take trips to your local museums and free places of interest.
Cancel that cell phone or reduce your monthly bill by lowering your peak hour minutes to the minimum and only use your cell phone in an emergency.
Become a do-it yourselfer. Do your own home repair and change your own oil in your vehicles. Visit your local library for “how to” books.
Take a look at your utilities. Do you have any water leaks? Lower your thermostat a few degrees and inquire if your electric and gas company has a budget plan.
Shop at garage sales, thrift stores, flea markets and browse over the classified ads.

Shop at your dollar store for cleaning products, paper goods, and toiletries. Oh now, now be nice my dishes and clothes don’t know the difference and my teeth and hair haven’t fallen out yet.

There are so many other ways to reduce your expenses. Just exercise your common sense.

Most of the time money problems originate from our lifestyle choices. Before you buy something, ask yourself if you really need it.

Establish a realistic budget and make those sacrifices to live within your limits. To me, peace of mind costs a lot less than that new car I dream of owning. Who knows tomorrow I could meet Mr. Right or Mr. Down Right Filthy Rich *wink*

Lex lives in Ohio and is originally from NJ. She has three children and four grandchildren. Her hobbies include reading, crafting and writing.

She has been inducted into the TSWBA Bowling Hall of Fame and is a two time TSWBA Bowler of the Year. She is also a NJ Doubles and Women’s All Star Association Champion. Although she does not bowl now, she enjoys coaching young bowlers.

Currently, Lex is the financial advisor for a frugal living and sweepstakes group called “Our Winning Circle”. http://www.ourwinningcircle.net

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Calculating cash flow is one of the most important tasks of the business owner. Revenue and expenses are rarely constant in a business and cash requirements need to be planned for shortfalls, seasonal factors or one time large payments. At the end of the day, a company that cannot pay its bills is bankrupt.

Unfortunately, while many business owners concentrate solely on their revenues and expenses to manage their cash flow, it’s usually poor management of the cash conversion cycle that so often leads to a cash crunch in the business.

What is the cash conversion cycle and why should I be concerned with it?

The cash conversion cycle is simply the duration of time it takes a firm to convert its activities requiring cash back into cash returns. The cycle is composed of the three main working capital components: Accounts Receivable outstanding in days (ARO), Accounts Payable outstanding in days (APO) and Inventory in days (IOD). The Cash Conversion Cycle (CCC) is equal to the time is takes to sell inventory and collect receivables less the time it takes to pay your payables, or:

CCC = IOD + ARO - APO

Why is this cycle important? Because it represents the number of days a firm’s cash remains tied up within the operations of the business. It is also a powerful tool for assessing how well a company is managing its working capital. The lower the cash conversion cycle, the more healthy a company generally is. If you compare the results of the cycle over time and see a rising trend it is often a warning sign that the business may be facing a cash flow crunch.

Understanding the components of the cycle

When evaluating cash flow, those factors directly affecting profit, revenue and expenses, are easy to understand and their affect on cash is straight forward; decreases in costs or increases in profit margin results in less cash going out or more cash coming in, and increased profits.

However, the working capital components of the CCC are a little more complex. In simple terms, an increase in the amount of time accounts receivables are outstanding uses up cash, a decrease provides cash; an increase in the amount of inventory uses cash, a decrease provides cash; an increase in the amount of time it takes you to pay your payables provides cash, a decrease uses cash.

For example, a decision to buy more inventory will use up cash, or a decision to allow people to pay for goods or services over 60 days instead of 30 days will mean you have to wait longer for payment, and will have less cash on hand. Below is a numerical example of the cycle:

Accounts Receivable outstanding in days +90

Inventory in days +60

Accounts Payable outstanding in days -72

Cash Conversion Cycle +78

In the scenario, you have cash tied up for 78 days. It should be noted that you can have a negative conversion cycle. If this occurs it means that you are selling your inventory and collecting your receivables before you have to pay your payables. An ideal situation if you able to accomplish this. Before you say it is impossible, remember that companies such as Wal-Mart are today selling a large part of their inventory before they have to pay for it. While it is not easy it can be accomplished.

An Example

Let’s assume you buy on trade credit from your supplier and an account payable is created. Your supplier wants full payment in 30 days, however, you are selling inventory very fast, sell the inventory a week later and are asking for full payment from your buyer in 7 days. You are now managing your conversion cycle. Consider, on day 1 you generate an accounts payable for 30 days from now. On day 7 you sell the inventory and generate an accounts receivable, which your buyer will pay for in 7 days.

What is your conversion cycle in the case? -14 days, pretty good and you congratulate yourself. On day 15, after you receive payment, you are flush with cash and have a choice of reinvesting the money or paying your supplier. What action you take will probably depend on a lot of factors, but as your supplier has provided you interest free cash for another 2 weeks, you may want to use it for those two weeks to generate greater returns; maybe you have outstanding credit you can pay down, you can buy additional inventory, or you may just want to generate interest returns.

Now consider that you also provide your buyers 30 days to pay you. On day 1 you generate an accounts payable for 30 days from now. On day 7 you sell the inventory and generate an accounts receivable, which your buyer will pay for in 30 days. What is your conversion cycle in the case? 7 days, not as good. You now have 7 days in your cycle during which you have repaid your supplier but will not receive payment for another 7 days from your buyer. You either need extra cash on hand or a credit line to support you for those 7 days.

What does this mean in terms of cash flow and your bottom line? If you have $1 million in annual sales and your receivables are outstanding an average of 60 days, that means you have $164,383 in outstanding receivables. Everyday extra day the receivables are outstanding (e.g. 61 days vs. 60 days) represents an extra $2,740 that is not available to use elsewhere. If you need a credit line to support your receivables and you pay interest at 8% that represents $13,000 in annual interest charges (expenses) based on an average loan balance of $164,000.

So, as you can see, the management of the conversion cycle can have a large impact on the business’s cash flow and profitability. The management of your cash conversion cycle could determine whether you require a lending facility or not, or whether you can meet financial obligations.

About The Author

Jeff Schein is a CGA and offers consulting and advice in the areas of business planning, business modeling, strategic planning, business analysis and financial management for new ventures and growing small businesses. Visit www.companyworkshop.com or mailto:jeff@companyworkshop.com.

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