Mastering Cash Flow: The Key to Financial Success

Budgeting. Just the thought of that word can elicit groans and shudders. Yes, there are those out there who love typing every expenditure into their spreadsheets or personal finance software programs, who gleefully save every receipt from every purchase, and who enjoy doing this every day. But for some, the idea of taking the time to create and maintain a full-blown budget can be intimidating.

Anna Prior
Wall Street Journal

The key to financial success is adopting a cash flow plan that will guide your financial decisions on a day to day basis. In addition, understanding and controlling how money flows in and out of your life will free you from financial stress and empower you to achieve your most important life goals. (more…)

Contingency Funds

Ready relief: Contingency funds take the sting out of crises and emergencies

What’s your plan for handling a financial emergency?

A windstorm blows down your fence. Your son needs braces. The refrigerator quits. You lose your job.

We can’t schedule crises, but we can be prepared for them. Having an emergency fund (also called a contingency fund) is the best way to cover big expenses that pop up unexpectedly. Absolutely everyone should keep a nest egg of cash that can be easily tapped when needed.

General wisdom holds that this account should contain between three and six months of your total living expenses. That might seem like a lot of money to tie up in a savings account or short-term CD (certificate of deposit) that yields no interest or a miniscule return, but the tradeoff is easy accessibility.

Without a nest egg you can easily tap in emergencies, you’ll be forced to dip into your investments and possibly incur penalties if you need cash quickly. For example, if you’re younger than 59 1/2 and you pull money from your 401(k) for an emergency expense, you’ll pay taxes on the growth portion of your withdrawal plus a 10 percent penalty. Or you may lose money when you withdraw funds from an investment when the market is down.

If you don’t have an emergency fund in your financial toolbox, I urge you to start one as soon as possible. You can funnel just $50 from each paycheck into a separate savings account to net yourself $1,300 in a year. Using that money to cover a new carburetor is a far better option than charging the repair and paying double-digit interest on a credit card.

If you do ever need to dip into your contingency fund, don’t feel ashamed. Instead, be proud of your thoughtful planning and the security that your foresight has provided. Just don’t neglect to restock your fund once you’re back on your feet.

Replenishing your emergency savings fund should be a priority. You might have to forego a vacation or other non-essentials until the account is back to a level that feels comfortable to you. If you use First Step Cash Management, a system I recommend highly, you’ll be able to see your whole financial picture and feel confident that you’re on the right track to meet all your goals.

Getting A Pro’s Help For Meal Planning and Grocery Shopping

Now We’re Cooking: How I Got Our Family’s Food Budget
Back on Track and Saved Myself A Lot of Aggravation

Dinners were becoming disasters in my house. After a busy day at work, I’d rush home to throw together a mishmash of entrees in a vain attempt to satisfy everyone’s demands. One daughter insisted on vegetarian food. My husband wanted low-carb fare. My picky 5-year-old wasn’t happy about anything. All too often, I’d throw in the (kitchen) towel and declare that we’d eat out that night.

Everyone was fed, but this wasn’t a good solution. I knew we were overspending on food thanks to the First Step Cash Management program, which showed me what I’d budgeted and what my actual expenses were. And I wanted us to sit down together, at our table, for a home-cooked meal.

I needed help, so I called The Savvy Life’s Melissa Tosetti. Melissa, the author of Living the Savvy Life: The Savvy Woman’s Guide to Smart Spending and Rich Living, is a whiz at helping families and businesses plug financial leaks.

We spoke for an hour about my shopping patterns, cooking habits and the quirks and preferences of our family of five. Then, she helped me create a shopping and cooking plan similar to the one she details in her book. The strategy that Melissa recommended has what she calls a “keystone habit” at its core: One grocery shopping trip a week, ideally on the same day each week.

I know what to buy on that trip because she helped me select 20 meals everyone likes and that I or my husband can easily prepare. Each week, I list five meals on my calendar (one night is for leftovers and another is at a restaurant), take inventory of my pantry and then create a shopping list for the ingredients I need to prepare those entrees.

My plan dovetails nicely with a $2.99 app called Shopping List. It keeps my list on my smartphone and allows me to update as needed. It also groups like items together, so if I’m buying milk, I can easily pick up yogurt and cheese. I love the check-off feature, which gives me a sense of accomplishment and makes sure I don’t miss an important ingredient.

Grocery shopping post-Melissa takes just an hour a week, and I no longer stress about what’s for dinner. I have a plan, and I have all the ingredients I need. Most importantly, I have peace of mind. Since I’ve implemented Melissa’s ideas, we’re eating better, together, and I haven’t once busted our food budget.

Common-Sense Cash-Flow Management Helps You Meet Your Financial Goals

Go With The Flow: Give Up Budgeting Forever And Embrace Cash-Flow Management

The traditional wisdom about smart money management is simple: You must create a budget and spend and save within its confines. It sounds so straightforward, right?

Yet budgeting remains a challenge for most people. Many of us, even those who pay their bills on time and have money in the bank, prefer to do it informally. If you’re one of them, please don’t berate yourself for a lack of discipline. (more…)

One Year In – Transforming My Family’s Cash Flow

A while back I posted to this blog about the importance of managing the family cash and the best way to get it done; with the First Step Cash Management System™. The post was titled, “Conscious Spending – How do you Manage Your Cash Flow? This is a follow-up on that post; and attempt to prove that it really can be done.

My husband, Lonnie, and I have been using First Step Cash Management System™ for one full year. Before First Step, we used a “one-bucket” approach – all of our income flowed into our checking account and, from there, we paid all of our bills. I used to track our expenses, but I could not predict from one month to the next our level of spending. It made me wonder, like so many others – where is all that money going? We now use the “3-bucket” method.

The 3-bucket method of cash management

  • Static Bucket – all fixed expenses are paid automatically from this checking account
  • Control Bucket – weekly expenses such as gas and groceries are paid from this checking account – cash or debit only
  • Dynamic Bucket – this series of savings accounts – one for each financial goal – receive automatic monthly deposits

I resisted setting up multiple new accounts thinking this would add complexity and cost. Once I got started using ING Direct (now CapitalOne 360) those fears proved false – actual experience has shown it to be free, easy, and even fun! The smart phone app makes it easy to track my weekly funds and my goals.

How does the 3-bucket method work?

Static Bucket: All fixed expenses are now on auto-pay. (OMG…Why didn’t I do this earlier?!)

Control Bucket: We have a fixed weekly “allowance” for our day-to-day expenses (gas, groceries, dining out, and entertainment). We only use cash and debit cards for these expenses. I resisted this idea initially too. Not use my credit card? What about card benefits? (And, isn’t that kind of Un-American?)

With cash/debit, the timing of expenses is always matched up with income. I feel much more in control of my spending. I am now very conscious of my day-to-day spending. If there is no money in the account, either we are finished spending for the week or we must decide which goal to take funds from for additional spending. And if there is money in the account, we know we are free to spend. Wow…Freedom – what a concept!

Dynamic Bucket: We have specific goals we are saving toward and can see our progress at any moment. Monthly transfers are made automatically. Each dollar of income has a specific purpose.

Results after one year of using First Step Cash Management System™

As a family, we are much more conscious of our spending and saving. Our weekly “control” bucket defines our weekly spending limits while our “dynamic” savings accounts make our progress toward our goals visible.

I don’t track expenses any longer – yet I feel much more in control. I feel relaxed when I see that we are accumulating savings specifically for upcoming expenses like summer camp, vacation, and a new car. Cash management is no longer a chore; it is a pleasure.

It is a very common misconception that tracking and categorizing expenses is the key to successful finance planning. In the past, I actually promoted this myth. It is helpful when starting a plan to have detailed information, but First Step relies on real life behavior – not estimates or projections – which are often garbage anyway.

Tamarind Financial Planning is here for you, with individual financial planning strategies, personal investment management techniques, and household budget planning tools designed to help you meet and exceed your cash flow goals.

Conscious Spending – How do You Manage Your Cash Flow?

Conscious SpendingHuh? Yep, it turns out, simply depositing a paycheck and paying bills has nothing to do with cash flow. That is just making and spending money. Anyone can do that. Managing your cash flow though is another matter – an important one.

A certified finance planner can coach you in effective cash flow management, helping you to discover where you are spending your money, and how to better control the flow of cash through your fingers. This is known as “conscious spending.”

Conscious spending is the key to better cash management

Cash flow is easily the most important factor in a family’s financial plan. Cash flow is what builds wealth – much more than returns on investment. Cash flow is where the rubber meets the road; where you take the actions that move you toward or away from your dreams and financial goals. But many people struggle to understand their cash flow – where does all that money go every month? Are you clear about your priorities, and can you see that your cash flow is directed toward those priorities? If not, you need a cash flow management plan.

First Step Cash Management System™ is an easy and effective tool that simplifies cash flow planning, eliminates the need to categorize all expenses, and tracks your cash flow in real time – what you have spent, as well as your future saving and spending goals.

Here are the components of cash flow management, as outlined by

  • Components of Income – your income sources
  • Fixed Expenses – the things you must pay for every month
  • Discretionary Expenses – the things you choose to pay for every month
  • Taxes – the things you are forced to pay for every month
  • Savings – the thing you tend to forget to pay for every month

Household budget planning is the best way for you to take control of your cash flow. Budgeting can help you map your priorities, matching them with your intended spending. However, most people need another tool to help with in-the-moment spending decisions. First Step Cash Management System™ is a tool that is focused in the present rather than the past; an effective tool that can be used to support your daily spending decisions.

Tamarind Financial Planning is here for you, with individual financial planning strategies, personal investment management techniques, and household budget planning tools designed to help you meet and exceed your cash flow goals.