Broker Check

Cash Flow Management

October 25, 2019

We recently attended a “Cash Flow” management seminar which covered many topics including managing cash flow, finding ways to repurpose your money for longer-term goals, prioritizing savings and spending goals, and being more mindful of your spending habits.

A good part of the presentation focused on how some are becoming more disconnected from money as a result of technology and the ease of money transfer.  Gone are the days of physically walking your paycheck into the bank, balancing your checkbook, or having to count the cash in your wallet as you pay for daily items such as groceries.  We have now grown accustomed to direct deposit, online ledgers, direct bill pay and peer-to-peer payment systems.  As a result, we are no longer in touch with our money and find it is more difficult to monitor our spending habits as much of it is automated and out of sight, out of mind. 

While we could all benefit from technology, this ease of payments and efficiency could lead to poorer spending habits and a loss of focus on our long-term goals.  It could lead to individuals spending money frivolously, not getting the full benefit form their hard-earned money, and missing out on the benefits that could come from saving and investing.

The seminar focused on taking back control of our cash flow, identifying the “bleeding” assets that could derail the path to financial freedom, and repurposing our money so that it is used more efficiently.

One example mentioned as a “bleeding” asset is dining out.  Dining out as a result of convenience could significantly increase your monthly budget compared to preparing meals at home.  Rather than going into each week with no meal plans, and therefore subjecting yourself to defaulting to dining out for convenience, the speaker recommended creating structure in your weekly   meal   plan.   One   recommendation   included designating one or two days a week to dining out and designating one day a week to go grocery shopping.  By eliminating the uncertainty and creating structure, much of the guesswork is gone and you’ll know exactly how to approach each week.  You’ll have a “dining out” day to look forward to and can also make your money go a lot further by buying groceries on sale and preparing meals at home.

Another common problem is reoccurring payments. Businesses know that once someone signs up for reoccurring monthly payments they are unlikely to cancel the payment, even if they are not benefiting from the product or service. Examples include gym memberships, online media streaming service subscriptions, and warehouse store memberships. It is important to review these payments periodically to ensure that there is some value being derived from the ongoing expense. If not, the reoccurring payment should be cancelled.

Everyone can benefit from stepping back and reviewing their household finances and expenditures.  With the holiday season approaching, staying mindful of your finances during a time of increased spending may help make the difference between achieving your financial goals and not.

One recommendation is to schedule regular meetings in which the household decision makers meet to review past expenditures and make future plans. This will ensure that the household spending patterns are being reviewed and reflect long-term financial goals rather than conforming to the short-term financial pressures of day to day life.