Cash flow, how we earn, spend, save and give, is the backbone of our money life. It’s where you have the day to day money decisions, and where you’ll find mismatches between what you say you value and what your actions reflect.
Cash flow could also be where you might sense the biggest blocks because frankly, being mindful around money is more work than hoping it will take care of itself. But don’t worry, you’ve got what it takes to be a boss around your money.
Open your eyes! All this is yours
First, start with gentleness and curiosity! Answer the following questions, preferably by writing it out to really get to the core.
- What would it feel like to be certain and confident around your every purchase?
- How would you feel about your money if you knew that you were giving to organizations that you truly loved?
- What would it be like to feel in your bones that you have enough set aside for an emergency and that house down payment?
- Can you imaging knowing that you were being paid well for you work?
In my experience and that of my clients, being able to say yes to each of these questions feels incredible! In our consumerist society feeling solid around your money is revolutionary! It’s putting yourself and your values first before anyone else decides how you use your energy.
In our consumerist society feeling solid around your money is revolutionary! It’s putting yourself and your values first before anyone else decides how you use your energy.
Getting your Money Management reps in
Although you might think making more money is the simplest answer, it’s not always true. When someone is not saving at their current income it may be difficult to save with a raise because the systems for it are not in place. I recommend clients first focus on creating systems that support them to best take advantage of raises, gifts, and cover emergencies.
Systems are making a decision now that sets a foundation for the future. Just like when you move to a new place you decide which room is the living room, which one’s the kitchen, which one’s the bedroom, etc. When it comes to money, give every dollar a job and a place.
Below are a few key systems to consider:
- Automatically paying yourself first
- Paying more than the minimum towards debt
- Keeping track of your income and spending
- Tracking every kudos you get in time for your job review
- Making sure your gifting goes toward BIPOC organizations
- Increasing your savings every time you get a raise
Building a Spending Plan
My favorite way of looking at cash flow is using the 50-20-30 plan. I was introduced to it when reading All Your Worth by Senator Elizabeth Warren and her daughter Amelia Warren Tyagi. I heartily recommend this book to anyone who wants to get their spending plan into auto-pilot.
The 50-20-30 plan is intuitive and flexible enough to change as your life changes. Although after a while it can be automatic, at first it requires keeping track of what you spend and at least weekly check-ins to see how your spending compares to your plan. During these check-ins you can make sure you’re being accountable to your plan, adjusting it as life changes, and celebrating your progress.
As you read these categories stay present with what your body is telling you. Is it curious, wanting to dive in? Do you want to scream because looking at this sounds miserable? Are thoughts of doing anything but this coming in? Slow down. It’s okay to put this aside and come back when you’re ready. Rome didn’t get built in a day.
Earnings – What’s coming into your cash flow? For clarity, use after tax income for the month. I also like to include retirement contributions so that I give myself credit for that in the savings portion.
If your income varies, take a look at your annual amount and what a reasonable number is for the month. Add everything up – this is how many dollars you can put to work.
Must-Haves – Think rent, utilities, basic groceries, minimum debt payments, car, etc. This should be roughly 50% of your net take home income. This way if you were to become unemployed at least your basic living expenses are covered.
Must-Haves are the things you absolutely need and are not negotiable. I’d include therapy but would draw the line at Netflix or other subscriptions. If I have to got to a bare bones budget, watching YouTube with ads is fine.
For the Future – This covers contributions towards retirement, an emergency fund, debt payments beyond the minimum, travel fund, etc. Here I also include education classes that will grow my income and job satisfaction. Because they’re an investment in myself.
At first this section might be low or even 0, but over time you’ll see it grow when you make investing in your future a priority. I started of at 3% and have moved way beyond it since then. If you can aim for 10% to start with you’re doing great! The national average in 2019 was close to 8%. Don’t forget to include your retirement contributions if you participate through an employer.
This is where I include charitable giving because it’s a contribution towards the society I want to live in. Some might include tithing here or in the Must-Haves category.
Wants/For Today – This is what’s left after covering Must-Haves and your For the Future plans. It covers everything else, from eating out, to the gym, to Spotify, etc. In my experience, unless you’re going gazelle a la Dave Ramsey and paying off debt as soon as possible, you need to enjoy your current life.
This section is necessary! Try to have at least 15% of your monthly income go towards enjoying your life. All work and no play makes Jack a dull boy…
Again, your money life is super personal. Making the time to create a system that reflects your values and goals hands you the reigns.
Are you headed towards your True North?
What if there’s just not enough? What if month after month your debt is growing or you’re barely scraping by? I know this feeling and it’s not fun!
Money anxiety is one of the worst traps to be in because money decisions are constant.
Take a breath and fill out the spending plan to get to the reality of your numbers. It might hurt, but it won’t kill you. I’m sending you so much love as you take a dive into this! Money anxiety is one of the worst traps to be in because money decisions are constant.
On the other hand, you might realize you’ve got so much in savings you’re not sure what to do. It might be time to invest, especially when you’re debt free, have a stocked emergency fund, and a comfortable income.
On a sheet of paper or spreadsheet start to list out the numbers for the first three categories in monthly amounts. Add up your income and see how it compares to your Must-Haves and For the Future categories by dividing each category by your total income. This gives you the percentage for each category.
If your For the Future category is 0 that’s okay. Sometimes getting through today is a heroic accomplishment, just know that it’s possible to grow that number.
Now, what’s left? That’s the amount you can comfortably spend for the month without going into debt. If it’s less than what you need, focus on growing your income and cutting your Must-Haves.
Could you refinance your mortgage? Call your internet company to see if they have a promotion you can use? Be creative in how you think of new ways to lower expenses while being patient!
Sometimes progress comes quickly like with a new job and a higher salary. Other times it’s more subtle as you change the way you spend to better reflect your goals.
Take a breath, you did it!
We started this dive into cash flow with gentleness and curiosity. We added systems to make managing all the little decisions easier. Finally, we added patience as you develop these new skills. This is tough work and you deserve a foot rub for going through it!
Managing cash flow is a marathon, not a sprint. As life changes the way you earn, spend, save and give needs to reflect that. And trust me, it will. But you’ll be happier with the results when you are proactive about setting the priorities.
Emergencies, last minute travel plans, and much needed self-care gifts will always come up. So make it easier on yourself and put systems in place to manage them.