How To Avoid Cash Trap Easily

How To Avoid Cash Trap Easily

This easy technique can let you identify the very month you will be cash trapped so as to avoid cash trap. Knowing the very month or week that you will be cash trapped long in advance would prove to save an individual from the cash trap.

Everyone will have a period in their lifetime when they will lack even a coin in their pocket. There is a financial problem when there is a cash trap issue on a monthly or regular basis. Reading and implementing the concept illustrated will provide everyone with the best chance to avoid cash trap even on a single occasion.

The Easy Annual Budgeting Trick.

This easy annual budgeting technique can let you identify the very month you will be cash trapped. It must be noted that almost all the expenditure lines of households are the same for every month and/or the year. For example,

1. Food

2. Rent

3. Water bills or purchases

4. Electricity bills

5. Cooking fuel purchases

6. School fees

7. Stipends to parents and/or wards

8. Toiletries for adults and infants (pampers)

9. Tithes and offerings

10. Association dues and contributions

11. Transportation and/or petrol/diesel

12. Clothing

13. Insurance deductions

There are other expenditure lines that are not the same for every year or month which would have to be determined by each individual. For example,

1. Hospitalisation

2. Tours or excursions or family trips

3. Household maintenance or repairs

4. Motor vehicle maintenance or repairs

Since the salaries or incomes of most workers for the incoming years are known in the preceding years, individuals can easily prepare a snappy and easy annual budget for the incoming years just around the time national budgets are being read around November or December. This budget is made by arranging the expenditure and months of a year in columns and rows. Those who have easy access to computers and are conversant with MS-excel should have an advantage. There are, however, diaries which already have this arrangement of expenditure and months in place. But, all that an individual needs is a pen and paper to perform this all-important activity.

The individual will be expected to sum up all the expenditure of every month and write the total at the bottom or end of the column or row for all the months in a year. The sum total of expenditure for every month will then be compared with the salary or income for its particular month. After comparing the monthly expenditure with its income or salary, there are three possible scenarios that will be seen for each month. Either the month will be negative (income will be less than expenditure) or positive (income is more than expenditure) or neutral (break-even).

See also: Salary Overdraft On Vodafone Cash.

Performing this simple exercise in November or December of the preceding year will definitely reveal the particular month of the following year where cash or liquidity will be a problem. The next episode of how to avoid cash trap will talk about how to maneuver the challenges of a cash trap for a particular month.

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