women cash flow and budgeting

Improving Your Financial Fitness:

Cash Flow Management

Presented by Laura Scharr-Bykowsky, CFP®, MBAPrincipal, Ascend Financial Planning, LLC

Women Building Wealth

Before We Start…..

• Does anybody want to guess what percentage of Americans spend more than they earn each year?– 43% of Americans spend more than what

they earn each year.

Goals for Today’s Session

• Insight to understand your situation• Inspire you to take action

– Ideas and methods to help you move forward

– Resources to take the next step

Financial Planning It is not just money; it’s your life!

• Financial Planner is “general practitioner” for your finances– Take financial pulse- symptoms– Identify areas of concern- “diagnose

potential problem”– Actionable plan- prescription for success– Monitor- “check- up”

Evidence of Financial Fitness

– Adequate emergency cash reserves– Little to no debt (unsecured) Adhere to guidelines safe %– Sufficient insurance protection (life, disability, P&C, liability, LTC)– Realistic vision of retirement– Appropriate savings for age– Proper estate planning- wills, living wills, etc.

Typical Symptoms of Financial Illness or Discomfort

• Poor cash flow management– Low awareness of spending patterns– No emergency reserves– Excessive debt

Why is Cash Management so Important?

• Provides sense of control• Fosters better marriage- 90% of divorces due

to financial issues• Reduces stress and anxiety• SWAN- Sleep Well At Night• Plan=Control=Achieve Goals

Wealth is not what you make, it is what you keep!

Chief complaint- “I don’t have any cash left at the end of month.”

• Diagnosis: Low awareness of spending patterns and behaviors

• Symptom: Low or negative cash flow• Are you spending in a purposeful way?

– Does your budget reflect your values and goals?»Cash flow form»Article- Purposeful Budgeting

Rx Spend Purposefully

• Record fixed, variable, discretionary and non-discretionary purchases for at least a month.

• Include less frequent bills such as quarterly or seasonal items

• Reduce discretionary (flexible) expenses• Set budgetary goals• Monitor your progress and put savings to work!

» Quicken, Mint.com, Mvelopes.com

What is a Purposeful Budget?

It is a spending plan that aligns with your most important values, goals, and visions for your life. 1. Visualize your future 2. Identify the values that are most important to

you 3. Compile a list of core goals 4. Track your spending 5. Review your spending

What is Your Relationship with Money?

• What was your first experience with money?• What was your parents attitude about money?• Does your view conflict with your spouse’s view?• What does money mean to you?

– Money is….• The root of all evil, a means to an end, a way to

feel secure, something to be splurged.• What messages are you holding on to?

Unhealthy Budget Buster Behaviors

• Live for today• Can’t say No• Don’t make

tradeoffs• Keep up with

Joneses

• Ignore it and it will take care of itself

• Impulsive shopper you, spouse, kids

• Spend “found” money many times over.

Budget Boosters

• Stop Eating Out• Consider Cell Phone Only• Slash Entertainment, Kids Activities• Pay Yourself First• Sell Items on Ebay• Use Cash or “Envelope” Method of Budgeting • Think Like Your Grandparents• Consider Debit Cards

Simple No Brainer Savings Pay Yourself First

• Save more by increasing 401K savings• Max the Match! Don’t leave money on the

table• Sweep target savings goal into separate

account automatically before it before it is spent.– Also Max your Roth IRA!

Chief complaint- “I don’t have any cash left at the end of month.”

• Diagnosis: Low to negative cash flow• Symptom: Debt- the “artery clogger”

– Are you suffering from financial chest pains?– Guidelines:

• <36% of gross income (all debt)• <28% of gross income (all housing debt)• No credit card debt• No or low auto loans

– Good debt vs. “bad” debt

Quotable quote

• “Americans like to spend money we don’t have to buy things we don’t need to impress people we don’t know”.

RX Debt Snowball

1. Budget Review2. Free up addl. cash flow in your budget3. Continue minimum payments 4. Apply cash flow saved to loan with highest

interest rate

www.whatsthecost.com

Diagnosis: Low or negative cash flow

Symptom: Insufficient emergency cash reservesRx: Keep 6-9 months of living expenses in cash reserves.• Also build a separate reserve for large cash purchases

(auto, home repair).• As money is saved invest it in a high yield savings

account that is FDIC insured.

» Bankrate.com, Ratebrain.com, your local credit union

Other Educational Resources

• The Millionaire Next Door: The Surprising Secrets of America's Wealthy Thomas J. Stanley (Author)

• Your Money or Your Life: 9 Steps to Transforming Your Relationship with Money by Vicki Robin, Joe Dominguez, and Monique Tilford

• The Richest Man in Babylon by George S. Clason

• Put Your Money Where Your Heart Is by Sue Stevens

Rx: Summary of Your Prescriptions

• Put together a spending plan• Spend Purposefully • Debt Snowball• Keep 6-9 months of living expenses in cash reserves.

Set up a separate reserve for big expenses.• Get help if needed from an expert who is a fiduciary

– Fee-only, CFP® professional

What Next?

• Money Habitudes• Retirement Planning• Investing 101• Tax Planning

Disclaimer

This presentation is for informational purposes only and is not intended as specific advice or recommendations by Ascend Financial Planning, LLC.

© 2010, Ascend Financial, LLC