A 2017 survey (CIBC polled of Canadians with household incomes above $100,000) says almost half of Canadians have no financial plan in place at all. Nothing detailed that tells them how they will reach their goals.
When I talk about personal finances, I try hard to stay away from the word ‘budget’. Why? Because there is a negative connotation towards that word just like the four-letter word “diet.” I have seen clients body language change when the word budget is used, so I use ‘cash flow’. When I introduce the concept of cash flow, I keep them listening and engaged. In my financial planning business, I work with many different types of clients. I have some who are making over $400,000 and some the family’s take-home pay is $42,000 a year. They all have one thing in common: they are all wanting to make their money do more things.
I use this analogy:
You and your spouse/partner are in a rowboat and every month your take-home pay is dumped in your boat. But the minute the money lands on the bottom of the boat, it starts disappearing in front of your eyes because there are holes in your boat – lots of them. Some of these holes you are aware of, such as mortgage, car loan, home insurance, but many you are not, such as credit card interest, e-transfer fees, bank fees. And more importantly, how much you spend on food, retail, fast food, iTunes, etc. After a long day at work, you don’t say to yourself, “I am going to treat myself to a tank of gas.” On a bad day, you go to Costco to buy chicken breast, milk and spinach but you come out with $200 worth of products, many you did not intend to buy. It is my role to help you plug those holes.
Fact: Spending money cannot be calculated consistently with any math formula – it is constantly influenced by behaviours. Your financial life can be simplified with the right Cash Flow Plan in place.
o Before you can begin to manage your money effectively, you need to identify what is important to you and your family.
o Complete a Cash Flow Analysis, which will help you and your spouse identify where your monthly paycheque is going, and why.
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