Cash Flow Planning-The first step towards a healthy Financial Life

When you hear financial advisers talk about providing you with a financial plan it usually sounds something like this. ” In order to meet your goal of being able to live on $xx,xxx per year when you retire you’re going to need to save $xxx per month based on your investment profile.” Well folks I hate tell you this but that’s not really a financial plan.  What it is is a retirement savings plan.

Don’t get me wrong.  You do need a retirement plan as part of your overall financial life plan.  You’ll also need an investment plan to go with it as well as an insurance plan in case something goes wrong.  And, oh yes, if you have kids you’ll most likely want an education plan as well so they can get a good education.  

Then, of course, you want to pay as little tax as possible on your hard earned money so you’ll need a tax plan.  And you may also want to be able to leave something behind when your days on this planet are done, so you’ll also want an estate plan.

All of these are important and together they go to making up an overall Financial Life Plan.

However, there’s one very important element missing.  HOW ARE YOU GOING TO PAY FOR ALL THESE PLANS AND STILL BE ABLE TO ENJOY LIFE!

That’s why it’s important to start with a good Cash Flow Management Plan. Just like a business must manage it’s income and spending if it wants to survive and grown, we too as individuals need to do the same.

You’re probably thinking at this point…oh, oh hears comes the budget talk. NOT HAPPENING! In my experience, budgets don’t work for individuals.

Why?

Because individuals (i.e. human beings) do not treat their money rationally. We are emotional animals.  If you haven’t taken the Money Mindset quiz yet, now’s the time to do it.  It will give you some insight as to how you deal with your money emotionally.

What a good Behavioral Cash Flow Plan will do is get you to understand the WHY of what you want to spend your money on and then help you structure your cash flow in such a way as to allow you to focus only on the components of your spending that you can control.

It takes some work and guidance, but the end result is well worth it.