Cash flowmanagement in a pandemic

There’s something ironic in discussing cash flow management in a time when so many have no cash, no flow. And yet, somehow, management is still necessary. Without oversight, what little you do have can easily evaporate, lost to “urgent” demands at the cost of essential needs.

In last week’s column I tackled six critical areas for end- of- the- year financial planning ( taxes, insurance, retirement, debt, housing, work). Now it’s time to focus on more immediate issues of managing the resources at hand.

As every budget counselor will tell you, balancing household finances comes down to simple math: Income must exceed expenses. When the opposite is true, the spiral downward accelerates at alarming speed.

As a career counselor with budget management training, I’m keenly aware of the impact of this downward spiral on career decisions. The more dire your finances, the more limits you’ll face in your career planning. Not because someone won’t hire you for your dream job, but because your ability to dream at all will be curtailed by the constant sense of financial urgency.

That’s a drastic picture, but it can be avoided or at least softened by taking control of your shortterm finances and current resources. The following five steps will give you a place to start.

1. Make a cash- flow budget. A regular budget can be a simple list of all expenses, contrasted with all income for the month. A surplus is good; a gap needs to be resolved.

But even a budget with surplus can go into the red if cash flow isn’t managed. This is a classic problem for workers whose regular paychecks would normally create cash cushions that carry them through the month’s expenses. Their unemployment income may cover essential bills but, without the cushion, overdrafts are occurring. A cash flow budget helps to manage these issues.

To start, list all expenses that occur in a month. This might be easier these days, when so many of our purchases are being made online.

Next, identify those core obligations that are essential / non- negotiable, such as rent, utilities and loan payments. To create a cash- flow tool, organize the core obligations by payment date, perhaps on a grid to make it visual. These are the points in the month at which cash must be available.

As a final step, add in your income sources and the dates when the sums become available each month. Are there surplus areas, where you have cash on hand? You can add in a negotiable expense, such as food – these are the days you can buy food, and the amount you can spend. Conversely, if your grid reveals points where essential expenses will exceed available cash, you must find a way to cover the expense, or decide whether to let it go late and pay the additional fee.

You might be thinking it would be easier to use credit cards to pay for nonnegotiables, and then make a constant, predictable monthly payment on the card. Easier, yes. Better? No. Adding to debt should be a last resort, not an escape.

2. Cut expenses. You’ve already done this, no doubt. But now that you have the numbers, take another look:

Which costs can be reduced or eliminated? As the holidays approach, can you make gifts instead of ordering online? Can you YouTube repairs, go without some things, barter for services?

3. Increase earnings. It’s not easy to earn money right now, but certainly not impossible. Think about things you can sell online, tasks you can do for cash, bonuses you can earn if you have a job now, additional jobs you can take, or anything else that will create income.

4. Consider bold moves. Selling a car, downsizing your home, getting a roommate … these are bold steps that can move the financial needle dramatically because they usually involve large numbers.

5. Seek help. If the cash flow gap persists, can you reduce expenses by using a food shelf? Have you applied for energy assistance? Does your dislocated worker program offer support for paying bills?

If these aren’t familiar processes to you, please remember that they exist to keep us above the water line. We all contribute to the programs through taxes, fees and outright donations and you’ll do so again when you’re back on your feet. For now, these resources may make the difference you need.

In the end, there’s no guarantee you’ll exit this pandemic financially “whole,” regardless of your careful management. But your odds improve when you know your numbers. As a bonus, managing your finances might also increase your confidence and courage. Those are qualities we can all use.

AmyLindgren ownsPrototype CareerService, a career consulting firm in St. Paul. She can be reached at alindgren@prototypecareerservice.com or at 626ArmstrongAvenue, St. Paul, MN55102.