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How To Improve Your Cash Flow

By Helwa Sofni Md Isa


Personal cash flow is an important aspect to sustain a healthy financial plan. Learn some of the ways to improve your cash flow.

Beware of little expenses; a small leak will sink a great ship – Benjamin franklin

Being aware of and familiar with your personal cash flow is one of the ways to measure financial health. It is the most important element in wealth management. Cash flow works like a heart to everything in the wealth management process.


What is “cash flow”?

Cash flow consists of two important components, which are income and expenses. It is about how much money inflow you are generating and how much money outflow you using for spending. It is always measured at a given period often monthly or yearly basis.

  • Surplus or positive cash flow is when your income is more than your expenses.

  • Meaning that you can save money and use that savings for other healthy opportunities such as emergency fund, investments, etc. 

  • Deficit or negative cash flow is when your expenses are more than your income.

  • Meaning that you are likely to already or soon to be incurring debt. 


So, the next question is, how well do you know your current cash flow?

A Malaysian Financial Literacy survey 2019 by a financial comparison portal, RinggitPlus, shows that about 43% of Malaysians spend either more or exactly what they earn. It also found that 53% of the 8,000 surveyed were not able to survive more than three months with their savings.


You must gain control over your money or the lack of it will forever control you – Dave Ramsey


Here are several tips on how can you improve your cash flow and have more and more surplus cash flow!


Tip #1. Understand your current income streams


If you are employed and receive a fixed income every month, this question is easy and straightforward to answer. You just need to be aware of your paycheck date (so that you can pay your commitment timely) and what are your mandatory deductions such as for EPF, SOCSO, and Tax.


If you are self-employed, the answer to this question is likely to vary with each month. It is crucial to understand your inflow pattern to meet your commitment timely. Additionally, for a business owner, business income should not be mixed up with personal income. In other words, you need to decide how much monthly paycheck you can have and if possible, how much yearly dividend you can enjoy without disrupting your business cycle.


Whether employed or self-employed, if you are an investor you would also enjoy passive income from your investments, such as through dividends received or rental income.

Tip #2. Keep track of your expenses.


You cannot truly improve your cash flow without knowing your current cash flow.

You need to understand what are your expenses and how much you spend on expenses, both regularly frequent and less frequent. 

  • Examples of frequent expenses: Monthly groceries, fuel, loan repayments, car servicing.

  • Examples of less frequent expenses: Annual quit rent, renewal of road tax, insurance premium payments.

Note: Unexpected emergency expenses (such as medical bills after a traffic accident) are reasons to dip into an emergency fund, and why you need to have a suitably-sized emergency fund


You can choose to track your expenses with paper and pen, on your computer with a spreadsheet, or even with one of many available expense-tracking mobile phone apps.

As you track your expenses, ensure that your tracking tallies with what your actual bank account shows. This helps ensure you maintain reliable records of your expense tracking, which will be very useful for the next tips in improving your cash flow.


Tip #3. Identify the types of outflow


Once you have done tracking your expenses, look at your outflow (what you are spending on) and categorize them. For example: 

  • Savings Outflow – this includes mandatory or voluntary savings and premium or contribution paid for insurance or takaful plans.

  • Financial commitment outflow – payment of loan or financing commitment to the financial institutions.

  • Expenses outflow – Home & living expenses, Transportation, Education, Entertainment, subscriptions, etc.

This step is crucial as it helps you visualize where your money is going. In the event that your income is strained, this step allows you to rank your spending priorities according to needs in order to deprioritize the less important items to spend on.


In some extreme cases, if  your outflow is on items you deem all to be necessary and the total is too much for your current income, then a debt management review is recommended.

Tip #4. Eliminate non-important expenses


With the information you gathered from expense tracking and categorizing your outflow, you should be able to see a pattern emerge. Use these data points to reflect on your spending choices.


Re-evaluate what are true needs versus wants for yourself and your household. Ask yourself some questions:

  • Do you really need to spend on these items? What is the ROI?

  • Can you find cheaper alternatives to your spending? Are the cheaper alternatives good enough?

  • Can you afford to continue your spending patterns? Would the same money put into savings and investments be better for you?

This part is of course easier said than done. Often as humans, we are attracted to a certain type of lifestyle influenced by the people around us. Other times, we gain satisfaction from retail therapy. However, if such behavior results in harming our long-term well-being, it is time to shake ourselves awake. Take charge of your own life and your own choices because they determine your future. Let others determine their future, for better or for worse, and keep yours within your own hands. 


Of course we all need a treat sometimes as well. Just make sure you do not end up treating yourself daily!

Tip #5. Increase your income


If cash flow is deficit or is trending that way, another consideration on top of trimming outflow is to increase income. It can be by either increasing your passive income or active income.


Passive income is a type of income where you are not actively involved and spend less time in the process. An example of this is the dividends