THE CASH FLOW PLAN - Tony King

Personal Financial Strategy the podcast

Welcome to personal financial strategy….. the podcast

a podcast wholly devoted to you and your money

bringing expertise to bear on how you:

• earn
• invest
• spend your hard earned cash

Hopefully you have visited our webpage at www.personalfinancialstrategy.com and you have picked up your free cash flow mapping tool…if so,.. You will find today's episode especially gratifying!

To review, in our last episode,. I laid out the five categories needed for a comprehensive cash flow plan they are:

Again visualizing spreadsheet with five columns from left to right the first column is:

1. income from all sources
2. monthly bills
3. monthly out of pocket spending
4. savings funds
5. And investment contributions

Now let's go to each column and talk about where we get the data to populate each of them.

Column 1 should contain our monthly income from salaries and wages to interest income you might be earning, passive income you might realize from investments, everything that comes in on a monthly basis should be listed in column one. Sources for this data will be statements that you receive on a monthly basis like your paycheck stub the, a monthly statement from your brokerage account etc.

Column 2 is populated by all of our repeating monthly bills. For example our utility bills, our car loan payments or rent/mortgages payments. In sourcing this data we recommend using the online technology from your bank. The simplest way to do this is; Sign into your banking software, go to your checking account and download all historical transactions from the first of one month to the 31st or last day of that month. typically your online banking software will download these transactions in a spreadsheet format, from there you can pick out your monthly/repeating bills to populate column number 2

Column 3 is monthly out of pocket spending, ideally this spending should be categorized. This data will be in the spreadsheet that you downloaded to grab your repeating monthly bills, column number 2, however there will be many transactions to all kinds of vendors we recommend for the first pass on a cash flow map that you not categorize every expenditure but concentrate on the “Big 5” categories, getting total monthly spend for:

• Restaurants
• Groceries
• Gasoline
• Clothing

and a catch all category... Merchandise (lately the easy way to track this is to total your spending on Amazon

Column number 4 is titled funds FUNDS

funds are a little set aside or accrual for a financial goal that you have placed in your future for the exercise of cash flow mapping we recommend a few like an Emergency Fund .. holiday fund,..or a fund to make a large purchase like a new car.

What we are doing here is setting aside money each month for large purchases to avoid carrying balances on credit cards. You can still use credit cards for major purposes gaining all those sexy air miles but you pay them off in full at the end of the month using the funds accrued in your “Fund”.

For sure this is the practice of delayed gratification (not popular in today's online get it now world) but it's one we highly recommend and in practice we think you will find that you have more cash available than you realized. That's a great feeling.

Lastly in Column 5 goes your desired amount of monthly contribution to Investments

There .. now you have it laid out in five neat columns totaled at the top…. I cannot emphasize enough how important this one tool is... as it is the starting point to attain financial clarity.

this one sheet will inform you,.. will give you insight,... and is the single best tool to get control over your finances.

If you have a populated CF Map,.. it's time to Harvest Information Insight and control over your personal finances by employing a cash flow plan

This plan is based on real numbers, your income from pay stubs and investment reports and downloaded spending from your checking account(s) and pulled from your Card statement … now looking at your map.

What do you notice? What pops off the page for you?

The first time I did this … there was a number that leaped off the page and hit me square between the eyes.

my wife and I were spending,...I'm embarrassed to say this but Our restaurant spending for the month was about 75% of our mortgage payment at the time.! You see, I am so embarrassed that I can't even tell you the exact number!

OK so this is a good starting point for turning the dials on your cash flow map...to make a cash flow plan.

My wife and I agreed that the restaurant spending was completely out of hand while we enjoyed going out to restaurants with our friends, this is definitely a valued part of our lifestyle but,.... The amount we were spending bordered on the irresponsible.

That's the bad news,.. the good news is we agreed on a number about half of our monthly average spending in restaurants not only leaves us opportunity to dine out with friends on a fairly regular basis but also freed up a few $100 that we could then add to our monthly investment column. After a few months of this one changed behavior,.. eyeing the new rate of growth in our investment column,..we felt great!

It gets better,.. Restaurant spending was just the 1st item we adjusted to create what we like to call a “Spending Plan”. We began a process of twisting the dials in every column to maximize our cash flow. It is an eye opening experience. We had money leaking out of the bucket everywhere,.. And this was the big contributor to the “out of control” feeling attached to our personal finances.

I know what you are thinking “ oh so you started living on a budget” no it's much more than that,.. we started to live by a spending plan. We like the term SPENDING PLAN better than BUDGET for a few reasons.

A budget may be necessary in the beginning of getting your finances under control, depends on the situation but budgets typically are one dimensional they are focused on spending exclusively whereas our cash flow plan gives us the opportunity to address each of the five categories on our map making it more comprehensive, more dialed in and allowing us to optimize our cash flow month in and month out.

Every plan has an author and that author is responsible for the plan he or she writes it and it is up to the author to execute the plan.

Budgets On the other hand once constructed feel like the budget is acting on me. The BUDGET is not really a part of me,.. It can take on a life of its own, an outside force trying to get me to change my behavior and , at least for us,.. It contributed to a scarcity mentality many of us battle when thinking of money as the author of the spending plan … I am in control!

If the plan goes wrong…. I have no one to blame but myself … I made the plan.

With a SPENDING PLAN you are literally telling your money where to go.

This is the very definition of Gaining Control over your personal finances.

I hope you are following along, using the tools we have provided.

This is a place to spend an ample amount of time reviewing all of your income, all of your spending and all of your investment, setting priorities, agreeing on priorities and adjusting the cash flow plan to live up to what you truly value in life.

Hammering out a Cash Flow Plan is a very gratifying experience, watching the plan work toward your goals month to month is even better.

If you have not picked up your free CASH FLOW Mapping tool at our webpage: personalfinancialstrategy.com

Please do so,.. It is absolutely free and it is the single best tool available to get control of your personal finances … next stop I will impart to you what we believe is the best banking structure to use for personal finances this is important because it adds a whole layer of automation and efficiency to your personal financial plan

You will not want to miss this very practical, very valuable Personal financial hack until next time keep strategizing.