linking cash flow management & life planning · journal of financial planning, june 2001....

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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?


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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


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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


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


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“Seek first to understand,

then to be understood.”

Stephen Covey

7 Habits of Highly Effective People

Key to Effective Communication


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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.


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determining the goals and objectives

they have as they see their lives

develop; and,




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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.




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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. Goal Setting



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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?


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Linking the Conversations

Cash Flow


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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?


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


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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…


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


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Adding Time Frames to Cash Flow

Static Bucket™ Control Bucket™ Dynamic Bucket™

Money Past Money Present Money Future



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


• 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?


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?


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Linking the Conversations

Cash Flow


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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


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Questions & Answers


Amy Mullen

Money Quotient

[email protected]

linking cash flow management & life planning · journal of financial planning, june 2001....

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