No, really, where DID it go?

I promised you yesterday we would talk about what to do if you are cash flow negative. Remember, that being cash flow negative means you spend more than you earn. It's likely that you are cash flow negative because of your discretionary spending habits (rather than your nondiscretionary expenses). If you are cash flow positive until you reach your discretionary purchases, then look for places you can reduce. Maybe you should discover gas station coffee rather than designer coffee. Or you could eat a few less meals out, or take your lunch to work. Perhaps you should go to the mall or home shopping channel or amazon.com a little less. We are doing cash flow analysis (not budgeting), and it's your decision.

What if your nondiscretionary expenses are too high? This is more complicated. Here, you may need to do a combination of approaches. First, cut some of your discretionary spending. Then, look for adjustable nondiscretionary expenses. Turn off lights when you leave the room, buy regular gasoline not premium, and cut back on the cable premium channels. If you are still in trouble, cut more discretionary expenses and look at replacing cars with less expensive models.

If this is too painful, your other option is to earn more money. Maybe you want to keep your lifestyle more intact, and you would prefer to add an additional income to your household (through a first or second job by a family member). This may be an option for you.

Often, these approaches are sufficient, but sometimes, they are still not enough. If you are really in trouble, who can you trust? We will talk about that tomorrow.

Be prosperous!
Peggy

Where Did It Go?

As you track what you spend, you will notice that it falls into two basic categories--items you need to maintain your normal lifestyle and items you don't really need (but just want). The necessities include your mortgage, car payments on a reasonable vehicle, utilities, taxes, groceries, and the like. These are called nondiscretionary expenses. The wants include trips to retail stores, eating out, and a million text messages a month. These are discretionary expenses. On top of this, if you are "cash flow positive," you have extra money left at the end of the month. Later, we will be talking about saving for your retirement. You may already have a plan for this. However, any additional money you want to save for retirement will need to come from your positive cash flow or discretionary spending. That's why it's so important to know your expenses. What if you're cash flow negative? Don't panic. We'll talk about that tomorrow.

Be prosperous!
Peggy

Try to Remember!

Yesterday, I gave you a task to write down everything you spend for a month. Today is your second day of that task, and I'd like to offer some suggestions on how to keep track of what you do.
1) If you have a "smart" phone, make a note to yourself.
2) After you finish shopping, call yourself and leave what you spent as a voice message.
3) Buy a little notebook, and carry it in your purse or pocket. That way, it's always with you.
Most people have trouble with this exercise when they are busy and make purchases early in the day. By dinner, that stop at Starbucks is a distant memory!

Be prosperous!
Peggy

Personal Cash Flow (We don't like budgets)

Yesterday, I told you that you would have an easy task today, and it's easy, but it will take you a little time to complete it!

I want you to write down every dollar you spend and what you spent it on for one month. I had a client return one time after completing this task, and $2,000 was labeled miscellaneous! Now, I don’t mind if just a little bit of money isn’t categorized, but $2,000 in misc. is a cop out. You need to be honest about how you spend your money. Remember that these are your cash flow decisions, so don’t worry about making me (or somebody else) mad. If you don’t do this honestly, it won’t work.

If you use an ATM card, the withdrawal isn’t the transaction, it’s what how you spent the money. So “ATM” isn’t a category either! If you have a weakness for $5 lattes, write it down. If you like electronics, write it down.

I don’t want you to judge yourself while you do this. There are no wrong answers, just an honest look at where your paycheck’s going. I told you it was easy. Tomorrow, we’ll figure out why this is so important…..

Be prosperous!
Peggy

Budget--a four letter word

Okay, I know that "budget" is a six-letter word, but you know what I mean! Budgeting is an awful process, and yet most of us (me too) need to understand how we spend our money. Since we all hate the word, I propose a new term: Personal Cash Flow.

"Personal Cash Flow" sounds like a corporate process, not a way to keep me from buying those cute Valentine napkins at the discount store that I don't really need! And I think the term is more descriptive.

Your cash flow decisions are personal. At the end of the day, you will spend whatever you want to spend. I might give you some ideas. Your loved ones might have ideas, but it's your choice.

I think when we realize that we actually get to control our money decisions (rather than feeling "acted on" by our money), we begin to change our relationship with money and become more successful. A new task tomorrow (it's easy)..........

Be prosperous!
Peggy

Merging Cash Flows and Dreams

After too many hours of football, today it's back to work! My friends (who don't own their own business) say "Isn't it nice to take off whenever you want?" I tell them yes, I'm free to work any sixty hours a week I want! So today, I'm back at it. And probably tomorrow, the Christmas gets put back in the closets and attic.

Yesterday, I suggested that you list some of your goals and dreams, from short-term goals to long-term. Why is it important to write things down? I believe that writing things down makes them more real to us. It's easier to change our minds when we don't have written proof otherwise! Some of your goals may be very achievable and some of them may be difficult or seemingly impossible. That's okay. You might be surprised what you can do.

Now, without worrying whether or not you can afford it, put a cost or price beside each of them. Don't underestimate it. Just write it down. If you aren't sure what it costs, then look it up before you continue. Remember the old proverb that if you don't know where you're going, you won't know when you get there!
Be prosperous!
Peggy

Happy New Year!

Welcome to 2010, the second decade of the new millenium! My name is Peggy Doviak, and I'm a fee-only CERTIFIED FINANCIAL PLANNER(tm) practitioner and a portfolio manager. Before I entered the finance field, I was a freshman composition instructor and then a corporate trainer. I changed careers when I saw some close friends suffer huge financial losses in their portfolios because they didn't understand investing, and they trusted that their financial professionals would take care of them. Now, many financial advisors are wonderful, but I believe it is still important for every single American to understand their money.

That's the goal of this blog. We are going to talk about all different kinds of financial issues, everything from budgeting to estate planning to knowing what questions to ask an advisor. Did you know that the number one New Year's resolution is getting control of money issues? If you break this goal into little pieces, it is much easier to achieve.

Most days I will give you a task. Your task for today is to write down where you would like to be financially in one month, one year, five years, and twenty years. If you would like to comment on these goals and dreams in the blog, feel free to do so!

Disclaimer: I work with many financial literacy organizations and teach for the College for Financial Planning. Please kinow that everything I say this year is only my opinion and doesn't reflect the views of any organization. Also, information I provide might not work for your risk tolerance or individual needs. Investing is risky, and you can lose money.