Household Cash Flow Planning

January 22, 2014

Cash flow is the life blood of a business and a household!  Without a proper cash flow system, the use of your money is compromised and ineffective – you can end up spending more in interest, and less on what is really important to you.  This is a system that you can adapt to your household and use your cash more effectively.  Is this work – yes! Are happy and successful people reluctant to work – no! There is a cost to everything, even happiness.

Step 1 – Frame your mindset:

A cash flow plan is about making sure you spend your hard earned (and limited) money on what is important to you.  Most of the things that are really important to you are not immediate – a vacation with your family, a concert you always wanted to experience, a piece of equipment for your table saw, your future financial security!   So first decide what is really important and decide you will stop spending on the things that are not as important.

Step 2 – Understand your lifestyle costs:

One to 4 times a year, review your spending and prepare your budget.  Take a look at your non-discretionary (fixed) and discretionary (wants) expenses and put them into a spreadsheet averaging them for the year and month.  Knowing what you need in your chequing account to pay your lifestyle costs is critical.  For a simple household budget spreadsheet download here.

Step 3 – Divide your costs into 3 main categories:

Savings  (Pay yourself first) – monthly and annually

Non-discretionary and fixed costs – the minimum you need to live on – monthly and annually

Discretionary expenses – entertainment, vacation etc. – monthly and annually

A month is the perfect amount of time to plan around so know your monthly average even if expenses are paid annually or quarterly.

Step 4 – Set up your banking:

Chequing (joint) account – non-discretionary expenses – Income deposited here.  Couples have the option of having their own chequing account but must transfer a pro-rated amount  into a joint payment account.

Savings account – Arrange for automatic withdrawals to your savings accounts. Automatic means it will always get done, rain or shine and will not tempt you by remaining in account.

Discretionary joint account(s) – Arrange for a set amount to go to a joint vacation or entertainment account.  This is where you save and pay for these periodic expenses.

Discretionary individual account – Arrange for a set amount to go to an individual discretionary account.  This is your fun, day to day money.  This puts a limit on it and sticking to that limit is easy because you only use a debit card for these expenses.


Credit card points cards were invented because they encourage spending so don’t let them suck you in.  If you do use credit to pay for your expenses have two cards – non-discretionary (fixed costs) and discretionary (wants) and label your cards.  You’ll then know which type of expense is being exceeded. I personally use debit for my discretionary costs.

You need some extra in each account so don’t budget too tight.

Automatic bill payment makes life that much easier.  The risk of them making an error is worth the time savings of having your bills taken care of.  Get on an email bill distribution service.

This system can be modified but the basics are important – separate accounts for savings, discretionary and non-discretionary accounts and automatic deposits and withdrawals.

What’s your M.Q.?

January 20, 2014

Do you know someone who is really smart, but makes really dumb decisions when it comes to money?  These individuals are likely to be successful in other endeavors, but their financial lives are out of kilter.  Here are a few examples and what to do about it.

•           Joan has a great job and earns a six-figure salary.  Even though she gets a generous raise each year, she can’t seem to be able to save and invest for her future.

•           Three years ago, John received a large inheritance from his grandmother.  If well managed, her generous gift could provide John financial security for the rest of his life.  However, he feels anything but secure.  The responsibility of financial stewardship has challenged his self-confidence and triggered anxiety attacks and depression.

•           Tina recently graduated from law school and landed a position in a top firm in San Francisco.  Although she was offered a very competitive starting salary, she finds that it is inadequate to meet her living expenses, car payments, and student loan payments.  After all the sacrifices she has made to reach this career goal, she is angry and frightened about her financial outlook.

•           Tim wants to micro-manage the family budget and it is driving Karen crazy.  They have been married five years, and Tim’s attention to their money matters is becoming increasingly obsessive.  To assert her independence in this relationship, Karen frequently goes on shopping sprees.

•           Ken checks the market several times a day.  On down days, he is filled with anxiety about his shrinking retirement nest egg.  Recently, after several days of steady declines, the Dow precipitously dropped another 300 points.  Ken immediately called his broker and demanded that she sell every one of his investments and put the proceeds into a money market.


You yourself can probably relate to one of these descriptions because nearly everyone has or has had a complex and difficult relationship with money.  As these examples illustrate, “financial success” depends on a lot more than on how much money you have!!

On this note, Money Quotient® (M.Q.®) is a measure of your financial well-being that represents a composite of both your financial knowledge (I.Q.) and emotional intelligence (E.Q.).  In short, your M.Q. can be expressed by this simple formula:

I.Q. + E.Q. = M.Q.

The concept of M.Q. is unique because, rather than using your net worth as a “picture” of your financial health, M.Q. takes a more holistic approach by examining both the fact and feeling aspects of your financial life:

•           Fact—The I.Q. part of your financial equation is all about learning the basics of sound financial planning.  This will equip you to make wise decisions about how you spend, save, and invest your money, and help you to work effectively with your financial advisors.


•     Feeling—The E.Q. part of your financial equation is all about your understanding of the emotional factors that influence your money attitudes, beliefs, and behaviors.  This awareness will give you the extra edge you need to achieve your personal and financial goals.


The point to remember is that self-knowledge is essential to understanding and improving your relationship with money.  When you earn, spend, and invest your money in ways that are “smart” and also compatible with your underlying values and priorities, you will then experience a sense of financial satisfaction and success.


In addition, it is important to realize that the process of raising your M.Q. is a life-long learning commitment, one in which you will continually strengthen your practical knowledge and your emotional intelligence in regard to your financial well-being.

 Reprinted by permission of Money Quotient, NP

How Much is enough?

December 17, 2013

By ‘how much is enough?’ I mean the amount that will allow you to stop driving so hard professionally should you choose to do so.  I mean the amount that will allow you to feel safe, the amount that will compensate for risking hard-won relationships, the amount that will affirm you’re feeling good, smart, successful, accomplished, in control.”

-Pamela York Klainer, How Much is Enough?

How much is enough?  Author Pamela York Klainer responds to this thought provoking query by writing, “The question is deceptively simple, but the answer is critical to integrating money with other aspects of your life and finding happiness.”

In similar fashion, financial planner Karen Ramsey commented in her book, Everything You Know About Money is Wrong, about the importance of making sure your financial life supports what is most important to you:

“Money will only improve the quality of your life when it is used with clarity.  Only when you learn to spend money in concert with your underlying values—the things that you most deeply care about—will it become a tool for creating a more fulfilling life.”

In other words, money can help you achieve our goals, but financial resources alone cannot produce the essential ingredients of a satisfying and rewarding life such as good health, loving relationships, and meaningful activities.  Keep in mind that the word “rich” has two meanings.  It can be can be defined as “possessing great material wealth,” and it can also be defined as “that which is abundant, meaningful, and significant.”

In his book The Prosperous Retirement, Michael Stein wrote:

“Just as a wagon wheel without spokes will not carry your wagon, money cannot, in itself bring joy, satisfaction, fulfillment, and a sense of balance into your life.  In fact, money sometimes can get in the way of achieving these non-financial goals.”

In addition, it is important to keep in mind that life is multifaceted and that each facet contributes to the quality of life you will experience—now and in the future.

Think of each facet as an integral part of your total “life portfolio,” and remember that it is your investments of time and energy that will make your portfolio grow.  Once you have a clear definition of what “true wealth” means to you, then you can invest in each area of life in a meaningful and purposeful way.

As you consider your life portfolio, ask yourself, “Am I experiencing the ‘return’ that I want and need?”  If not, it’s time to re-evaluate and re-balance how you allocate your limited and precious resources.

Reprinted by permission of Money Quotient, NP


“It is never too late to pursue the work that speaks to us from inside ourselves.  Let’s look at that idea the other way around as well.  We are called to recognize our strengths, and it is never too late to hear that call.”

-Deborah P. Block & Lee J. Richmond, Soul Work: Finding the Work You Love, Loving the Work You Have