Cash-flow planning month is nearing its end. If you got a spot on my calendar, it was great to see you! If you didn’t, head to our client portal at fpfo.co/meet. We now offer cash-flow planning consultations year-round, so you can schedule at your convenience for any time that works for you. 

If we met recently, I probably have a good idea about what you like to spend money on. For some, it’s Amazon shopping. Others prefer to spend on vacations or outings with friends or family. With one look at my cash-flow history, I can plainly see that, after accounting for housing and my recent vehicle purchase, my biggest spending categories of the year are …

•  🍽️ Restaurants, Liquor Stores, Breweries, Bars
  • Mainly dining out, it’s my long-winded category name for that and enjoying adult beverages

• 🏒 Hockey (Includes Tourney Hotels) 
  • Equipment, smelling salts, sweaters, team dues, tournament registration fees and lodging — everything it takes to get me and my partner out on the ice

• 💙 Game Tickets (Avs, Eagles, Flyers, Packers)
  • Catching our favorite teams live (and that’s the Colorado Eagles, not the Philadelphia Eagles!)

What does that tell you about me? Probably that I’m a foodie who likes hockey. A lot. And that I’ve spent quite a bit on hockey tournaments and tickets this year, since they tend to come along with a lot of food and drink expenses.

What does your cash-flow statement say about your personal finances and you? If you haven’t reflected on your cash-flow plan recently, it might be time for a discretionary spending post-mortem. We tend to know where our money is coming from. But when it comes to discretionary spending —outflows that aren’t exactly the same or similar on a monthly basis — we don’t always know where our money is going. If we know how we’re spending, though, we can make changes to better align our cash outflow with what we care about most. Let me walk you through it — and show you how you can become a cash-flow pro.

1. Take a look at your data.

Cash-flow tracking is a hugely important piece of personal financial planning. And it’s all in the details! Take a quick look back at your spending. Perhaps you’ve been diligently tracking your spending for years. Or maybe you’ve only got good data from this year so far. (Like my partner and I, who, after over 11 years, only combined our finances as of this year. P.S. You never have to combine your finances with your significant other if keeping them separate works better for you!) 

Whatever the length of time, you’ve got some juicy spending details at your fingertips! Now take a guilt-free look at your numbers. I say guilt-free because, unless you saved your receipts and kept the tags on, you probably can’t return the things you’ve spent money on. So don’t bother judging yourself for something you can’t change! You’re about to do something great by making a solid plan for moving forward, anyway.

Where did your spending surprise you, in both positive and negative ways? Where would you have liked to have spent more — and less? What about the bottom line? Are you showing a surplus that mysteriously didn’t make it into your savings? Do you show a deficit, meaning you had to dig deep into savings to support your lifestyle?

Bring your thoughts and the answers to those questions into the next step.

2. Update your monthly spending in RightCapital.

You’ll want to separate out your housing expenses (such as your rent or property taxes and basic home maintenance), any debt payments (like your rent or mortgage loan, HELOC, and auto payment), and insurance costs (including homeowners or renters, auto, umbrella, life, disability, and long-term care). Why? They live in the Profile > Net Worth tab of your RightCapital, and you don’t want to double-count them. You don’t have much control over them, anyway, as the payments are fairly regular. While you can track and keep them on your cash-flow statement, there’s no real planning to be done with them. 

With those set aside, you’ll know what your Pre-retirement Living Expenses and/or Retirement Monthly Expense are. Update these in the Retirement tab and click “Refresh” at the bottom. How’s that probability of success look?

If it’s gone down due to your updated expenses, you’ll probably want to move on to the next step. If everything looks good but you found some spending surprises or changes that you’d like to make or you’d simply like to see if you could spend more, continue to Step 3. 

If your probability of success is the same or higher with no surprises or changes to make, you’re all set! In general, you can continue enjoying your comfortable quality of life in this case. Just keep tracking your transactions for your next cash-flow check-in. 

3. Set goals.

You don’t have to wait until the beginning of a new year to set goals. You can even change them on a monthly basis! So dive into your budget and see what you’d like to change. Rely on what surprised you. Think of what made you ask yourself, “I spent how much there?” or “I’d like to spend more here.” in Step 1. 

Just remember to keep it simple and make your goals realistic. Doing too much at once is bound to bring you down and lead you to fall short of the goals you set. So choose up to three spending categories to focus on at a time. Then enter smaller, more incremental goals in your cash-flow tracker. Three categories max per calendar quarter seems to work well. 

This can give you more focus and control as you work to make meaningful spending decisions. Plus, it’ll save you time in Step 4 with fewer categories to check in on. And you won’t be trying to change too much (in the quantity of categories or in spending amounts) all at once. That’s how you’ll accomplish real change!

4. Track and check in.

This is by far the most important step. And I mean that not only because it’ll give you the data you need to start fresh at step one at your next check-in. It’s the most crucial step because it’s how you turn your cash-flow plan into cash-flow action. So get to it, cash-flow pro!

I recommend weekly or slightly more frequent budget check-ins. Why? Because I know how often many of you (and I) make purchases. If we’re not checking in at least weekly, it can be tough to rein in spending and stay on track toward goals. 

So spend 15 minutes a week categorizing transactions and recategorizing as necessary. Your cash-flow app will likely learn from you and better categorize your purchases over time. Next, check in on your spending levels to see where you’re at. A quick glance at the categories you’re not focusing on to ensure they’re in line will do. It should also leave time for you to spend a minute or two on your three-or-fewer goal categories. 

Have you gotten off track? Plan to be mindful the next time you’re about to make a purchase that would fall in these goal categories. If you’ve really gotten off track, select a category or two with excess spending capacity, and shift it where needed. It’s that easy to become your own cash-flow pro! When I tell you that budgeting doesn’t have to be difficult, I mean it. I hope you can see that here!

Looking back at my own cash flow for the year so far, I have to say that my spending solidly reflects my values. If you’re struggling to start tracking your spending or get a better handle on where your dollars are going, let’s meet. Plus, stay tuned for my next blog. I’ll walk you through setting up your Monarch Money app. It’s a one-stop shop app for cash-flow tracking and budgeting. While I alluded to it here, I’ll also dig deeper into how those two (cash-flow tracking and budgeting) differ. And you’ll find out why, if you’re not experiencing cash-flow issues, you may never even have to budget. You won’t want to miss it!