The written cash flow plan, or what is commonly referred to as a budget, is one of the most important components of a healthy financial plan. The dreaded “B” word unfairly gets a bad wrap from some people. A budget is simply a written game plan where all your money is spent on paper and with a purpose before the month begins. Many find that when they get into the habit of doing a monthly written plan they do not feel they are being constrained in a straight jacket, but rather experience a sense of freedom financially that they have never felt before.
Having a plan is important because you are now spending your money intentionally. It is amazing to see that many people “find” money after creating a budget that they did not know they had before. It is almost like you get a raise just by doing a budget! Also many married couples have improved their communication not just in their finances, but in other aspects of their marriage just by doing a budget together.
A written cash flow plan gives intention to your spending. If you make $4,000 a month and want to pay an extra $500 on your debt, you must live off of $3,500. There are no vague guidelines, only absolutes as you will give every dollar your family earns a place and a name where it will be spent. In addition, a written cash flow plan is more than a way of tracking your spending at the end of the month; instead it is where you spend every dime on paper before the month begins.
At JW’s Financial Coaching setting up a written cash flow plan is the first thing we have listed on the major components of a healthy financial plan. Not having time is not an excuse, as you really do not have time not to make one! Sadly most Americans do not take the time to do one. According to a 2007 Pew Research Study, 51% of United States households do not have a have a monthly budget. For those who are interested in getting help setting up a budget or are in need of tweaking the budget, please contact us to set up a free 30 minute consultation.