THE CASH FLOW MAP - Tony King

Welcome to personal financial strategy…..  the podcast. A podcast wholly devoted to you and your money bringing expertise to bear on how you:

• earn
• invest 
• spend your hard-earned cash 

Let's start with the definition of the cash flow map - It is a Monthly view of all Income and all Expenses

Sounds simple,.. And it is,.. But obtaining accurate data to post in the CF Map can be a bit tricky and it requires time and effort to produce a CF Map with long term value.

The cash flow map is the cornerstone report from which all your financial strategies should flow !

I will even go so far as to say that if you are making financial decisions in the absence of a well founded cash flow map you are driving blindfolded.

Many financial coaches encourage starting with a cash flow map  … however where they fall short is in developing the map to its full potential.

Most advisors do the quick math to find out if an individual is living on less than they earn. THIS IS IMPORTANT even fundamental in setting winning strategies…. But …

A competent cash flow map uses real income data, real spending data and real investment data , to achieve an accurate snapshot of the individual's financial reality,... today.

The cash flow map is where we get all the data needed to actually make a cash flow plan kinda makes sense right? You pull out the map,.. Then you plan your route

As much as I detest old cliches,.. I am going to use one here: GARBAGE IN GARBAGE OUT. And This is why it is important to put ample time into constructing your cash flow map if we do not spend an appropriate amount of time making sure that our cash flow maps are up to date and accurate there is really no way to make sound financial plans going forward.

It is astonishing to me that cash flow mapping is not taught in school,.. It is so foundational … it should be taught in High School.!

OK well … Let's get to it

The cash flow map has five basic components... All of which should be viewed…. on a monthly basis …..sorry to say this ... but the best way to make a cash flow report is to use a spreadsheet,   

If the S word just made you cringe a bit,.. Hang in there we have something for you at the end of this episode.

For now just picture in your mind a blank sheet of paper, turned horizontally with 5 columns, at the top of each column is a label which describes the contents of that column,.. We will come back with tactics on how to get this data,... buckle your seatbelt,.....here we go …. Column labels from left to right:

1. income from all sources
2. monthly bills
3. monthly out of pocket spending
4. savings funds
5. And investment contributions

Now that we have the columns laid out ... lets talk definitions for each:

1. Income from all sources is pretty self explanatory

This column should include any source of monthly income like 

Salary & earnings

Dividends 

Interest Income

Monthly income payments from other sources for example rental property you own

3. Monthly Bills - Are bills that repeat month to month such as loan payments, utilities, mortgage payments, insurance payments …  all of these bills are easily automated using your bank's online bill pay tool.
4. Monthly out of pocket spending typically this is spending not included in monthly bills 

And This spending varies month to month ...the biggies for this column are usually gasoline, groceries, restaurants, medical expenses .. clothes etc.

4. Savings funds this is money set aside each month to pay for future spending or unplanned spending examples of funds would be:  

• An emergency fund
• A auto maintenance fund
• A Christmas fund
• A Vacation fund

Having “Funds” is a great way to inject planning into spending

5. Investment contributions:

We view Monthly contributions to retirement plans as investments,.. but we also want to consider things such as monthly contributions to traditional investments like stocks, bonds, mutual funds, exchange traded funds and other easily purchased investments through a brokerage account.

Now in your mind's eye ….  picture column totals for each column

And from there sum the totals of columns 2 through 5

subtract that number from the total of column one this will answer the fundamental question of whether or not you live on less than you earn.

However, a well constructed cash flow map can tell you so much more it is the basis from which you can begin a process I like to call “turning the dials” to create the best cash flow plan imaginable

Have you ears glossed over yet,.. I hope not because this is good stuff and an essential element to Financial Wellness

Hopefully I have piqued your interest to the point where you are at least curious about what your own cash flow map might look like

I have good news    go to the personalfinancialstrategy.com web page and there you will find under the tools section an actual spreadsheet tool prepared just for you. 

It's in an easy-to-use format ... all you need to do is fill in the blanks!

You can do this using income and spending numbers off the top of your head to get a sense of your map, but to get an accurate map capable of informing your financial future I recommend you attend one of our Financial Insights Webinars. 

 

 A word about ..OUR WEBINARS ..  we do not run canned/recorded webinars, our webinars are actually mini-courses in Personal Finance and all of our classes are live via Zoom, and have a capacity of 15,.. use the “join a webinar “ button at personalfinancialstrategy.com  to save your seat.

 

Next Episode we will put the last two bricks in our personal financial strategy foundation and then we are off to interview guests specializing in:

Earning more

Investing more

And yes,.. Spending more ,..stretching those hard earned bucks until they scream!

We have a dandy guest line-up headed your way,..