by WayPoints Admin-JBM | Feb 25, 2015 | Your Cash Flow Journey
“If you don’t design your own life plan, chances are you’ll fall into someone else’s plan. And guess what they have planned for you? Not much.” – Jim Rohn –
“Setting a goal is not the main thing. It is deciding how you will go about achieving it and staying with that plan.” -Tom Landry –
“A good financial plan is a road map that shows us exactly how the choices we make today will affect our future.” – Alexa Von Tobel –
“Crystallize your goals. Make a plan for achieving them and set yourself a deadline. Then, with supreme confidence, determination and disregard for obstacles and other people’s criticisms, carry out your plan.” – Paul J. Meyer –
Many prominent people have much to say about developing a plan and many have become successful by carrying out and implementing their plan.
Would a builder build a house without first developing or drafting up the Blueprints? Without one, they would not know the dimensions, nor the location for each room, nor the materials they are to use.
Would a truck driver begin a cross country journey without a GPS or a map? Would he plan out his stops and determine beforehand his DOT hours and break schedule? Would he not do a routine check of his vehicle to ensure it is in good running condition?
Would a CEO of a large industrial company require his staff to develop a Fiscal plan for the upcoming year so they can operate efficiently?
If plans are so important in our everyday lives, then why are we so gun shy with developing our own Cash Flow Plan? In a life time, most of us will allow over $1,000,000 to pass through our fingers. Yes, you read that correctly. Why would we not want to develop a plan for that amount of money? You see, with a well executed plan, much of that money can stay within your fingertips reach instead of building marble columns and floors for the Bank you borrowed from. A Cash Flow Plan will give you the freedom of choice and allow you to tell your money what you want it to do. Our WayPoints Financial Crew can help you develop a plan that will keep your money safe and working for you.
by WayPoints Admin-JBM | Feb 23, 2015 | Your Cash Flow Journey
I would challenge most anyone if they told me, “Our situation is different. We are living paycheck-to-paycheck and have no flexibility in our budget to improve upon.” For as long as I have been helping and guiding people with their personal finances, there has never been a client who couldn’t improve on what they were currently doing. When you examine everything you are spending money on, I guarantee, with focus and diligence, you can realize a significant reduction with your expenses. This exercise is the result of years of research and analysis. Most middle class families can see expense reductions at this level. Let’s take a look:
- Car Insurance – If you shop around and challenge agents with other quotes, most families will be able to save about $330 a year.
- Gasoline – Aggressive driving, Jack Rabbit starts, low tire pressure, hill acceleration, panic stops, driving over 55 miles per hour all contribute to increased fuel consumption. Adjusting your car driving behavior will save you about $72 a year.
- Cell Phone – Grab your most recent cell phone bills and look at them to see what you are actually paying for. Are you paying for internet service that you are not using? Are you paying for 1000 minutes a month, when you are only averaging about 350? Are you paying for text messages that you are not using? There is so much competition amongst cell phone providers. With minor adjustments, you can save on average $240 a year.
- Home Phone Line – Ask yourself a tough question, “Do I really need a land line? Would it be possible to use my cell phone for all calls?” If the answer is no, you may want to look into Skype or Magicjack. If you can get by without a land line, call and cancel it. This will probably save you $200 a year.
- Dinners Out – Most families spend on average $400 + a month on dining out. If you make this a special occasion and cut it in half, you will save on average $2400 a year.
- Groceries – Many families buy prepackaged foods and convenience items and many produce hundreds of dollars worth of waste every year. On average with diligence and some added meal time preparation, most families can save $1200 a year from their grocery bill.
- Lunches Out – Most of my clients ate out for lunch about 2 to 3 times per week. Most averaged $10 per day. Even if you cut this back by 1 lunch a week, you will save $520 a year per working adult.
- Conveniences – If you have a coffee or soda addiction, you could easily save over $360 a year cutting back.
- Fees and Overdrafts – If you pay your bills on time and avoid low checking balances you will be able to avoid about $150 a year in fees and overdraft fines.
- Gift Giving – This has been one of the largest issues with so many clients over the six years that I have been a financial navigator. My motto is, “A gift from the heart has more value than a gift that costs more than you can afford.” If you put some effort into giving of your time, talent and abilities, you could provide some very low cost gifts that anyone would be grateful to receive. This is an adjustment, but once accepted, it could save you $800 a year.
This is just the skim off the milk of some very cost effective changes you can make with some minor adjustments. So what is the total annual cost savings produced in this exercise? When added all up, the annual grand total of all savings is more than $6200. Can you imagine what this savings could be if you examined every expense category?
by WayPoints Admin-JBM | Feb 19, 2015 | Your Cash Flow Journey
It’s surprising to see how many people ask what a Zero Based Budget is. Very Simply put, it is when every dollar of income is given a job or a name. Just vision a huge bucket where your take home pay and any other generated income is dumped into that bucket. Attached to the large bucket are hoses that filter down to a multiple of smaller buckets that represent all your expense categories. Those categories will include all your monthly expenses, all your debt; both secured and unsecured, periodic expenses, savings, and investments. A zero base budget will empty out the big bucket and fill up all the smaller buckets with nothing remaining. If the smaller buckets aren’t able to get filled by the larger one, then a negative monthly cash flow results. When this happens, two things might occur. Either money is moved from a reserve savings to finish filling the smaller buckets or money is borrowed (Debt) to top them off. To avoid this from happening, we need to decide how we are going to redistribute the funds from the larger bucket so we have just enough to fill the smaller buckets. When the big bucket is empty and the smaller ones are full, then a zero based budget will result.
by WayPoints Admin-JBM | Feb 6, 2015 | Your Cash Flow Journey
Budgeting or Cash Flow Planning can be frustrating, especially if you don’t understand how to adjust for the variability of your expense categories. When I work with clients, I always try to teach them how to turn the variability into a fixed and firm expense. This does not mean that variability won’t still exist, but if you understand the mechanics behind the different types of expenses, the easier it will be to build out your monthly plan. There are three types of expenses that we need to include in our budget but find a way to treat each as a fixed amount.
The first type of expense is “Fixed”, so no adjustment will need to be made since it is the same amount every month. Typical fixed expenses are your mortgage payment, car payment, cable bill, cell phone bill and any other expense that does not change over time. These are very easy to program into our monthly plan.
The second type of expense is “Variable”. Variable expenses can and may be different every month. This type of expense includes; groceries, eating out, entertainment, fuel, utilities and other expenses that are hard to calculate month-to-month. Many of these variable expenses can be turned into a Fixed expense by setting a limit for the ones that are controllable. Controllable expenses that are variable are groceries, eating out, entertainment, etc. Decide in advance how much you want to set aside for these controllable items then track these specific categories to make sure you don’t go over the pre-set limit. Other variables like utilities and fuel consumption can be somewhat fixed by calculating the average spent over a six month period.
The third and final type of expense is the “Periodic”. These types of expenses are the ones that get most people frustrated and causes severe challenges with monthly cash flow planning because most people don’t plan for them. A periodic expense is an expense that does not occur every month but will occur at some point in the future. There are many different varieties of periodic expenses and planning for those expenses is critical for proper budgeting. We often fail to look into our future to determine what our monthly allocation should be for a future expense. Christmas, which happens every year, is one periodic event that many people will wait till Thanksgiving then wonder how they are going to pay for it. Many of us have a water and sewage bill that comes due every quarter, so most people will try to pay it in full from their earnings they received the month it is due. To properly plan for a periodic expense, it is best to calculate the cost of the expense, then divide that cost by the number of months remaining before the expense comes due. That calculated amount will be the monthly set aside for the upcoming periodic expense. Once you do this for every periodic expense, your budget will become more consistent and less variable making it easier to plan.
by WayPoints Admin-JBM | Jan 26, 2015 | Your Cash Flow Journey
As you move forward in your financial journey, you should continuously ask yourself, “What opportunities do I have available to me that will free up extra cash that could help me progress faster toward financial freedom?” Additionally you should ask, “What erodes my opportunity to achieve financial success?” To answer these questions, you must examine your financial commitments and purchasing habits. All of us make small purchases everyday that are given very little thought, but when added up over time could generate significant wealth potential.
Take a look at those Starbuck junkies who go beyond the $4 a day Latte purchase and habitually return that same day to feed their passion. Many of these people will spend $10 a day fueling a habit that will give them very little in return. This $10 daily opportunity could cost them $141,250 over a 20 year period.
Take a look at all the bottled water that we purchase and consume. I personally know someone who spends $150 a month for Smartwater. Annually this indulgence costs $1,800. If this $1,800 was invested every year in a savings account yielding 8%, in 40 years its value would exceed $500,000.
The biggest erosion of our hard earned income is all the interest we pay for the privilege of borrowing money. The biggest example I can give is what we are actually paying for the home we so excitedly financed. Did you know that the average American spends 34.5% of every dollar earned on interest expense? If you finance a $250,000 home for 30 years, you will have actually paid over $500,000 for that home once it is paid off. Stop the insanity now and send a second check every month for next month’s principal payment. This will cut your mortgage from 30 years to about 15 years.
by WayPoints Admin-JBM | Jan 24, 2015 | Your Cash Flow Journey
If you ever bought a New Car, you know that depreciation will devalue the car over time. The steepest depreciation occurs in an auto’s first two years, when its wholesale value plummets 30 to 40 percent of its original sticker price.
So it’s not long before the value of a new $21,000 car drops by $6,000 to $8,000. By buying used, you let a car’s first driver deal with that big depreciation nose dive. You get the car you want without the financial strain or the hassle of being several thousand dollars upside down on your loan.
A new $28,000 car will lose about $17,000 of value in the first four years you own it.
If you don’t have $10,000 available cash and must purchase a car, finance it for 3 years but keep it for 6. Your monthly payment will be around $300. Once paid off, save the $300 a month you were spending and save it for another 36 months. In three years time you will have about $11,000 cash plus the value of your trade-in. Buy a used car for the $11,000 cash, invest the money you received from the trade and continue to add $300 a month for a future purchase. After 6 years you will have over $25,000 cash available for your next vehicle purchase.
