Cash flow planning is the term we financial planners like to use instead of budgeting. Budgeting can feel too much like dieting. It implies restriction and sacrifice.
But cash flow planning? It’s more like relaxing in a lounge chair on the pool deck, listening to the sound of someone else swimming laps while the breeze rustles the leaves of the palm trees. Especially when you have me to help you do it.
How do i Create a Cash Flow plan?
First, you and I will identify all your sources of income.
These might include:
- a salaried or hourly job as an employee
- independent contractor or self-employment work
- money from selling stuff on eBay or Etsy
- a monthly stipend from your parents
- real estate rental income
- investment income
- trust income
We also look at how this money flows into your life throughout the year. Is it predictable? Irregular? A little of both? When does it arrive? How much is it?
Get clear on your spending
Second, we’ll identify all your expenses. I like to be extremely thorough here. You might think it doesn’t matter how much you spend on trash bags, air purifier filters, or Patreon. And you might be right.
But I want to make sure. So we’ll go through my super-comprehensive list of possible expenses to identify which ones you have and how often they occur. Then we’ll use your bank and credit card statements too put actual numbers together to see how much you’ve been spending in each category.
It’s always more than everyone thinks. Even for financial planners. Just like everyone else, we aren’t always on top of tracking our own expenses. There will be no judgment or spending shaming if we find that your Uber Eats tab is why you can’t seem to afford a vacation. This is just an information-gathering endeavor.
put everything together
Third, we’ll do our best to create an approximation of how your income and expenses come together month by month throughout the year. This can feel especially challenging if you’re self-employed, but I’ve been doing it for 20 years, so don’t worry, I’ve got systems for you.
Even if you get a steady paycheck from a salary, you probably have months where your expenses are higher or lower than others. It’s comforting to have a plan for those instead of being stressed about how you’re going to pay all your annual insurance premiums in October.
Cash flow planning isn’t just a numbers game
We’ll also take a look at how well your spending aligns with your values. Are you happy with what you’re spending on restaurants because you love getting out of the house and trying new food? Or are you just eating out because you’re exhausted and you’re rather be able to spend that money on something else?
I’m not a therapist, but there is a lot of emotional and behavioral stuff that drives what we do with our money. Maybe there’s something you want or need to change; maybe not. But being intentional with your money is essential. It’s what will allow you to live the life you want. Sometimes getting a different person’s perspective or having an accountability partner can help you figure stuff out that you couldn’t on your own.
this doesn’t sound very fun
If this sounds overwhelming, well, it can definitely be a lot of work. Maybe it’s not really like sitting by the pool. But you don’t have to do it alone or in one sitting. That’s what I’m here for. And I kind of do think it’s fun, which I hope will make it more enjoyable for you.
When you see the impact it has on your life, I believe you’ll think it was worth the effort—and be able to float on your back in that pool, fully relaxed, breathing steadily, knowing that your financial situation is under control.