Five Ways to Improve Cash Flow in 2021
By John Owens, CFP®, EA
Ahh, the time for New Year’s Resolutions has arrived! And for many folks, improving monthly cash flow could be the key to increasing saving in 2021. Here are some steps - big and small, that can help improve your cash flow this year - allowing you to save more money!
Unsubscribe!
While it’s fun to hit that button in your inbox at times, this type of unsubscribing requires reviewing your credit card statements. We all have a ton of subscriptions - Audible to HBO Max, Stitch Fix to Bitchbox and everything in-between. These can add up quickly and sometimes can become superfluous. Now is the perfect time to take inventory of what you’re paying for monthly and how that fits into your new year goals. Just make sure not to unsubscribe from BKFI in the process!
Adjust that Withholding
Do you get a refund on your tax return every year? Instead of giving the government a tax-free loan, it may be time to adjust your withholding. A $2,400 refund in April could be another $200 a month that you can add to your 401(k)! For Brooklyn FI clients, we can review your tax withholding and let you know if there’s any adjustments to make.
Negotiate your Rent
The Coronavirus Pandemic has scattered the rental market - a mass exodus from cities, and vacancy rates popping. It’s certainly a renters market in many parts of the country. Before renewing your lease, be sure to shop around and see if your landlord has any flexibility on the rent or lease term. Maybe your rent will remain the same, but you’ll get a free month, or you can upgrade apartments across the hall for more space to work from home at a comparable rent. It doesn’t hurt to ask - after taxes, housing costs are often one of the highest expenses we see for clients!
Refinance your Mortgage
If you own your home, negotiating your rent is likely out of the question, but there’s another way to free up cash flow. One is through refinancing! With mortgage rates near all-time lows, there may not be a better time to do this. Let’s say you purchased your condo a couple years back on a 4% 30-year mortgage and you currently owe $850,000. If you could refinance that for a new 30-year mortgage at 3.25%, you’ll save over $500 a month. Be sure to watch out for closing costs, however!
Shop around for Insurance
There are few things more commoditized than insurance - like home, renters, and auto policies - many of which are renewable semi-annually or annually. And there’s often inertia to just sticking with your current insurance company - but it pays to shop! I recently moved from Michigan to Delaware and had to shop around again. In that process, I changed insurance providers and saved $70/month - well worth the half-hour it took to get a few quotes online.
As planners, we often get asked if there’s a cash flow silver-bullet. Unfortunately, for most folks, there’s not. Certain expenses are fixed and can’t be easily tweaked. But taking a holistic view of your financial situation and expenses can yield some real cash flow savings in the new year!