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Cash Flow and Vacations

| June 15, 2016
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Cash Flow, Vacation

Call it frivolous, irresponsible, cynical or sentimental, but planning a vacation into your budget might be one of the greatest investments you will ever make. As you consider your finances and the future, clearly one of the most important components of your financial plan is your cash flow.

The saying goes something like this, “if your outflow exceeds your income, your upkeep will be your downfall.” In business school they described the expenses one might have as fixed or variable. A fixed cost is generally a cost you will have by just showing up. And in business a variable cost is the incremental cost that is added when you produce more products. The goal is generally to reduce your fixed costs as low as possible.

In the personal realm, costs are more often considered discretionary and non-discretionary. Usually, the non-discretionary expenses include food, shelter and clothing. The discretionary components of one’s budget includes the quality and quantity of your food, shelter and clothing along with a number of other luxuries like entertainment, travel, furnishings, gifts and donations.

“Yesterday’s luxuries become today’s necessities.” Unfortunately, it is much more difficult to reduce your standard of living than to increase it. However, I would suggest the important aspects of life are generally free. Even if you had to reduce your standard of living, you would still have your loved ones and the opportunity to spend time with them.

Normally, you can assume the larger the house you choose to live in, the higher your fixed or non-discretionary expenses will be. It costs more to furnish, heat, cool, clean and maintain and insure a larger house than a smaller one. So the luxury decision to own a larger house will have a compounded effect in your cash flow, not only today, but for as long as you choose to live that lifestyle.

If one can determine to minimize their outflow, they can generally have a greater peace about their future finances than the family that does contrary. There are tricks and ideas to minimize your outflow and not give up living.

About now, you are wondering why I would start an article about cash flow encouraging you to take a vacation. The logic is this: most things people spend money on offer some enjoyment and fulfillment for a limited amount of time. However, c

As this summer rolls around, there are plenty of opportunities to travel at all price ranges and build some unbelievable memories. Take a look at your budget and kick a little in your travel category and enjoy this summer with your family!

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