Hi, I’m Erik Wolfers. I’m the founder and managing member of First & Main Financial. We’ve been helping people achieve financial success since 2001. Today I want to talk a little bit about cash flow.
Cash flow can be thought of in conjunction with budget. When we help people with a financial plan, we need to know what their lifestyle is and what all their expenses are, so that we can use that information to calculate the probability of success for not being able to work someday (retirement).
A lot of people don’t really want to go through their budget, especially when they think about looking at all the ways that they spend money or all the small things that they spend money on. There are pieces of software you can use to itemize all your spending. It does take work to itemize your spending and teach a piece of software how to bucket your different expenses—especially if you’re writing checks, the software doesn’t know what the checks are for.
We have software that allows clients to electronically attach accounts and then it counts up how much money you spend. Personally, I’m not a big fan of pieces of software—I like simple spreadsheets. One way to think about a budget or your cash flow, is to make big buckets: When did my paychecks come in? When does my pay come in? When do I have my big expenses like mortgage payments or property taxes?
Credit cards are a great way to simplify your budget or your cash flow. If you put everything you can on a credit card or even two credit cards that bill two different times of the month, then you can build a simple spreadsheet that summarizes the money coming in and the money that’s going out and the dates that this is happening; then you see when you might run out of money or when you might have extra money.
A method also for cushioning against big cash flow needs in the short-term is a line of credit on a house. You can borrow a little bit on the equity of your house and then pay it back as quickly as you can, or borrow more for home improvement projects or a big vacation, so long as it does get paid back—it’s not good to leave money on a line of credit for a long time, necessarily. Credit cards often have a year-end statement that just shows you how much money you spent. You can just take your grand total divide it by 12 and then use that in your cash flow spreadsheet.
If you’re watching this and you have any interest in having me help you build this cash flow spreadsheet, a simple cash flow spreadsheet, or share the one that I use personally, I’d be happy to do so.
If you are looking for some financial guidance; whether for a one time financial plan or continuing advice on your investments, we invite you to meet with a First & Main Financial planner for a free consultation. We would be more than happy to sit down with you, assess your situation and review our services to help navigate your financial future.