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  • Writer's pictureSusan J. Brown

Real-Life Cash Flow Planning

Designed for real people and real life!

I don’t really like to use the word budget. A budget implies strict oversight into what you are spending and monitoring that can take years off your life! No but seriously, I prefer a cash flow planning approach that is designed for real life and for real people!

The Real-Life Cash Flow Planning™ approach is a plan for saving and spending that factors in all family members needs and wants. It is aligned with what is most important to your life. If you are feeling frustrated and that money is just flying out the door, then you need to go through this process with your family. Because you are reading this blog article, you will likely be the one to take the lead on this project in your family. It is quite common to have one person more interested in the family finances than the others. You will need to find creative and fun ways to approach this in order to get buy in from other family members.

Figure 1.

Real Life Cash Flow Planning™

You can see the basic five steps to the model in Figure 1. Most of our models are based on five steps, because after that it is just too difficult to follow.

It is important not to skip one of these steps since each one plays a critical role in the process.

Steps 1 and 2

Know What you Spend Today and Know What is Important and What is Not.

You can use our Expense Matrix™ found in our blog article "Essential Versus Non Essential Expenses", to help you go through steps one and two. Alternative, you can simply get out a sheet a paper and start writing! The important thing here is to have a visual of what you are spending money on today.

As the leader of this project, you will likely have to do step 1 by yourself. This can be accomplished by gathering credit card and bank statements from before and during COVID. Make sure you note the amounts of cash withdrawals as well since family members may need to elaborate on where that money is going.

Then you are ready for Step 2. This is a time to have a discussion around whether the things you were spending money on were bringing you enjoyment? Were the expenses necessary or not necessary? You should allow quite a bit of time for this step as it will generate a lot of discussion. Keep the conversation light, this is just a first step and recognize that money can bring emotional responses.

Step 3

Know Your Goals

The third step is really about discussing the “why” around this process. Why should you even bother reducing expenses? We talk about setting goals in this section but you really also need to talk about your family’s risks. To keep it simple, just ask everyone the question, “What would happen to our family if one of us should get sick or pass away unexpectedly?”. Not a fun question, I know, but a very important one. Should a certain amount of money be set aside for a rainy day, or for an insurance policy to cover these risks. To keep this less complex right now, just simply write down some of the things that concern your family and some things you want to save for in the future. You can get help from an advisor to fill in appropriate amounts in those sections later.

"You will need to find create and fun ways to approach this in order to get buy-in from all family members."

Step 4.

Prioritize and Bucket Expenses

This is where it is crucial to categorize your expenses according to priority. Here are five categories in order of important that you can use to do this:

1. Basic Living Needs – what expenses enable us to live. These usually include groceries, shelter costs, utilities, gas, car expenses, minimum debt payments etc.

2. Risk Management needs – these usually include emergency savings, insurance and healthcare costs.

3. Basic Living Needs – this comes back to your discussion in step 2. What activities make you the happiest? Try not to judge each person’s response.

4. Goals – What money is being set aside for your future? This can include retirement but also making extra debt payments.

5. Additional Lifestyle – These are the big ticket items that could be sacrificed to fill some of the other areas above. Theoretically, you can live without these expenses since they don’t fall into Basic Living Needs.

If you need help with us, we have a Five Point Cash Flow Model™ that can help you go through this process.

Step 5

Reduce and Reallocate

Once you go through the process of categorizing expenses it is time to look at whether there are some gaps. You can now start to have the discussion as to what is going to change in order to fill those gaps. Can other family members start contributing? Will you reduce additional lifestyle spending? This should be a decisions by all family members since it can lead to resentment and unhappiness when it is one-sided.


Susan Brown CLU®, FEA, CFP®, RRC®, CIM®

Investment Advisor

IA Private Wealth ǀ Propel Financial Life Management

Insurance Advisor ǀ Propel Insurance and Advisory Inc.

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