Cash Flow Killers, Part 1: A Confession from a Financial Planner

Cash Flow Killers, Financial Planner

“Where is our money going?? How is it possible that I’m a financial planner, I can make a good living, and I still feel completely stressed out about money?”

Almost exactly 10 years ago, I realized that I didn’t have a good handle on my family’s cash flow management. The realization was hard to admit; it was frustrating and embarrassing because I had been a financial planner for over five years. Despite my profession, I felt consumed by money worries. It caused tension at home and sabotaged my time with family and friends. Instead of being present while playing T-ball with my kids in the backyard or while paddling up a river in the Boundary Waters Canoe Area, I’d find my mind wandering to my family’s cash flow, wondering why it wasn’t easier.

So in April of 2009, I’d had enough. I rolled up my sleeves and set to figure out what exactly was killing my family’s cash flow. Pinpointing the problem was important not just for our family—I knew that if this was something my family was struggling with, we were likely not alone. I needed to dig deeper for the sake of all our clients who were depending on my team for financial advice and guidance.

After reflection, research, countless client conversations, and dozens of trials with mobile applications and strategies, our team has identified several cash flow management killers. We have discovered and developed simple solutions designed to liberate you to live your best life. In the upcoming weeks we’ll unveil those Cash Flow Killers, and our hope is that in this series you’ll be able to laugh and relate to a stressful topic, and apply an idea that might empower you to:

  • enjoy guilt-free spending
  • simplify cash flow management
  • reduce money-related stress
  • improve cash flow communication
  • repurpose cash flow, in a meaningful way, to make the most of your One Life (pun intended)

Cash Flow Killer 1– Unplanned Spending

Some of us avoid looking at cash flow altogether. Or if you’re like me, maybe you’ve tried different systems for tracking but haven’t been able to find something that sticks. For years I invested countless hours creating and revising budgets in Excel, but they never ended up matching what we were actually spending. So I painfully reviewed years of credit card and bank transactions. Like magic, one obvious cash flow killer appeared year after year; it was unplanned spending.

Unplanned spending, which is different from emergency reserves, includes items that we haven’t planned for in any other budgeting category. As I poured through old documents and receipts, I realized that unplanned spending had been robbing my family of almost $5,000 per year!

Much of the unplanned spending in my family related to our kids getting older. For example, we had diapers in our shopping budget with an infant and a toddler in the house, and we held the gross misconception that once we were done with diapers, we’d get a surplus (yay, potty training!) Turns out that as kids get bigger, they also tend to eat more. So our grocery bills went up! As our kids graduated from diapers they started getting into activities like swim lessons, dance, and summer camps. The kids also grew teeth and needed braces, which I’m told has an average cost of $5,000 – $6,000. You get the idea!

But I didn’t only have my kids to blame for unplanned spending. Other unexpected items that sabotaged my family’s cash flow included inflation, and losing or breaking things, which in my family happens way more than we expect. Just recently, my wife’s keys fell out of her pocket and into the bowl of a commercial grade public toilet, while it was flushing! Another $200 down the drain….literally!

Potential solutions to the issue of unplanned spending:

1) Create a category in your budgeting application for unplanned spending and track all of your unplanned spending transactions.

2) If you don’t want to spend more time on your smartphone tracking every cash flow transaction, consider monthly setting aside money into an account (checking or savings), that can be easily accessed to cover your unplanned spending needs.

3) Determine how much you should set aside for unplanned spending and do it. 1%-2% of your income could be a good place to start for how much to set aside for unplanned spending.

The next time someone asks you, “What’s new?” tell them you’re planning for the future and you’re updating your unplanned spending budget for the year. You might get a few eyebrows, but hopefully you get a few laughs when you trade unplanned spending stories that have killed your cash flow over the years.

Unplanned spending doesn’t have to be a Cash Flow Killer; plan for the unexpected and you can expect to live your best life.

Additional Resources:
• Cash Flow Killers: Part 2 (coming soon)
• Learn about One Life’s process and cash flow management services