Do you remember the first time you received your own money? Maybe it was a dollar from the tooth fairy. Or perhaps $5 for helping dad rake leaves. Or, if you were really lucky, $10 as a birthday gift from Aunt Jane. Now, do you remember how you felt? Probably rich and excited — the possibilities for spending were endless, and the choice was yours.
But maybe there were also some restrictions on how you spent that money. Mom and dad made you put half of everything you got into a savings account. Or you had to donate some to your church or another charity. Or perhaps you realized that your windfall wasn’t going to be quite enough to get exactly what you wanted, and you had to decide whether to keep stockpiling your money or settle for something else.
This was your first, very simple introduction to cashflow. You received “income”, you covered your “expenses” (savings/donation/paying off your younger brother not to tell on you), and then the rest was available for whatever your heart desired and could afford. These concepts are the basic building blocks that govern much of how you handle income and spending as an adult.
Today, the options are certainly more complex. Unless Aunt Jane is prone to randomly sending you large amounts of cash, you probably have a set income. Your expenses have multiplied — housing, food, children, to name a few. perhaps there are trade-offs to be made, especially if you don’t have enough income to cover all of your expenses. Or maybe you have just enough, but then don’t seem have anything left over for saving for the future. Feeling a bit overwhelmed?
Then here’s some good news: you’re already savvy to the basic steps you need to start your own, best financial planning. Cashflow allows you to see where you are right now — with as little or as much detail as you need to feel comfortable — and then start looking at realistic options to get to where you want to be, both now and in the future.
So often the term “financial planning” seems to immediately mean complexity: you need to create a “model portfolio” using the right “asset allocation.” Ugh. It does not HAVE to be that way. Trust what you instinctively know — this is what I have, this is what I need, and this is what I want — and use cashflow to start your planning. Pretty soon you’ll rediscover the excitement that comes from possibilities.