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Linking Cash Flow
Management & Life Planning
Your Most Important Client Conversation
Copyright 2012 First Step, LLC & Money Quotient, Inc.
Presented by
Amy Mullen
FPA of Dallas/Ft. Worth
May 24, 2012
2 Copyright 2012 First Step, LLC & Money Quotient, Inc.
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Ben Coombs’ Questions
Where are you now?
Where do you want to be?
What are you willing to do to get there?
3 Copyright 2012 First Step, LLC & Money Quotient, Inc.
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Life is Rational & Emotional
Life’s journey is perceived through a filter of both
facts and feelings
Both facts and feelings drive financial decision
making
Copyright 2012 First Step, LLC & Money Quotient, Inc.
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What is Reality?
We each create our own version of reality
No two people see “what’s going on” in the
same way
We are highly influenced by others in the
development of these constructs
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Jacqueline Kelm
Appreciative Living
Copyright 2012 First Step, LLC & Money Quotient, Inc.
Why is this Important?
You and your client are coming from different
places on just about everything
Helping your client to “see” and articulate
his/her frameworks is often the first step to
working through an issue
This kind of discovery process leads to
proactive conversations
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CoachVille, LLC
Copyright 2012 First Step, LLC & Money Quotient, Inc.
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“Seek first to understand,
then to be understood.”
Stephen Covey
7 Habits of Highly Effective People
Key to Effective Communication
Copyright 2012 First Step, LLC & Money Quotient, Inc.
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Life planning is a process of...
helping people focus on the true
values and motivations in their
lives;
“Experts Examine Emerging Concept of Life Planning”
Journal of Financial Planning, June 2001.
Copyright 2012 First Step, LLC & Money Quotient, Inc.
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Life planning is a process of...
determining the goals and objectives
they have as they see their lives
develop; and,
“Experts Examine Emerging Concept of Life Planning”
Journal of Financial Planning, June 2001.
Copyright 2012 First Step, LLC & Money Quotient, Inc.
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Life planning is a process of...
using these values, motivations,
goals, and objectives to guide the
planning process and provide a
framework for making choices and
decisions in life that have financial
and non-financial consequences.
“Experts Examine Emerging Concept of Life Planning”
Journal of Financial Planning, June 2001.
Copyright 2012 First Step, LLC & Money Quotient, Inc.
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11 Copyright 2012 First Step, LLC & Money Quotient, Inc.
Exploring
Values & Motivations
Facilitating a
Goal Setting Process
Creating a Framework
for Decision Making
Financial Planning
A Guided Process
3 key entry points…
1. Levels of Satisfaction
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2. Life Transitions
3 key entry points…
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3. Goal Setting
3 key entry points…
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Instructions
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Pick 2 areas where your satisfaction is
relatively high
1. For each area, discuss what has contributed to
your satisfaction
2. What would a “ten” look like in each area?
Pick 1 area where your satisfaction is
relatively low
1. Was there a time when your satisfaction in this
area was higher?
2. What would it take to raise your satisfaction one
or two points?
Copyright 2012 First Step, LLC & Money Quotient, Inc.
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Linking the Conversations
Cash Flow
Copyright 2012 First Step, LLC & Money Quotient, Inc.
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Budgeting System Cash Flow Management
Looks Back Looks Forward
What went wrong? What do we want now?
Correcting Mistakes Working toward goals
Restrictions/Constricting Choices/Freedom
Constant tracking Automatic
What is the difference between
budgeting & cash flow?
17 Copyright 2012 First Step, LLC & Money Quotient, Inc.
Your Client’s Cash Flow
Income
into
household
Home Mortgage
Car Loan Utilities
Credit Card
Groceries
Entertainment
Dining
Shopping
Cash
ATM
“Mad Money” Master
Checking
Account
Credit Card
Insurance Medical
18 Copyright 2012 First Step, LLC & Money Quotient, Inc.
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A New Way to Talk about Cash Flow
Imagine that your client has three “buckets” of money…
Let’s shift our thinking a bit…
19 Copyright 2012 First Step, LLC & Money Quotient, Inc.
What’s in the Buckets?
• Static Bucket™ – the money that has been spent, or agreed to be spent, at some point in the past
• Control Bucket™ – the money will be spent in the next 7 days
• Dynamic Bucket™ – the money that will be spent in the future
20 Copyright 2012 First Step, LLC & Money Quotient, Inc.
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Adding Time Frames to Cash Flow
Static Bucket™ Control Bucket™ Dynamic Bucket™
Money Past Money Present Money Future
21 Copyright 2012 First Step, LLC & Money Quotient, Inc.
22 Copyright 2012 First Step, LLC & Money Quotient, Inc.
Cash Flow as a Bridge
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Income to
your
household
Fixed
monthly
expenses for
your
household
Static Account
Checking
Account Control Account
Debit Or Cash
Dynamic Account
Savings Account
Weekly lifestyle
and personal
expenses
Monthly savings
for future
expenses
Control Account
Debit Or Cash
Dynamic Account
Savings Account
Dynamic Account
Savings Account
Setting Up Accounts
23 Copyright 2012 First Step, LLC & Money Quotient, Inc.
• Promotes positive conversation
• Increases awareness
• Addresses both spouses’ needs and wants
• Provides a sense of freedom
• Puts the focus on goals
Why does cash flow fit LP?
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• Customized for each client’s lifestyle
• Stops over spending
• Eliminates credit card abuse
• Promotes saving for future purchases
• Creates a framework for daily decision making
• Based on accurate and reliable numbers
• Facilitates success of the financial plan
What’s in it for the planner?
25 Copyright 2012 First Step, LLC & Money Quotient, Inc.
Peace of mind
• Bills paid automatically
• Savings transferred automatically
Sense of Freedom
• Freedom to spend weekly money
• No advisor judgment
Excitement and Motivation
• Sit back and watch Dynamic Accounts grow
What’s in it for the client?
26 Copyright 2012 First Step, LLC & Money Quotient, Inc.
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Linking the Conversations
Cash Flow
Copyright 2012 First Step, LLC & Money Quotient, Inc.
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“When you have a dream and a plan
working together in the construction of a
life chapter, you have a ‘mission,’ a
circumscribed purpose that defines your
use of time and space for the duration of
this particular life chapter. People with a
mission know where they want to go.”
Frederic M. Hudson
Mastering the Art of Self-Renewal
Living Life on Purpose
Copyright 2012 First Step, LLC & Money Quotient, Inc.
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Questions & Answers
Copyright 2012 First Step, LLC & Money Quotient, Inc.
Amy Mullen
Money Quotient