Do you use a monthly cash flow plan? Most people call it a budget, but that often leaves a bad taste in people’s mouths (mine included). Terminology aside, do you think it helps or hinders your money?
Here’s why this matters so much to me.
I spent the first half of my twenties avoiding a monthly cash flow plan, feeling it went against my freely spirited nature. Despite my best efforts to save money, invest, and stay current on my credit card payments, those habits suffered. I just didn’t have a plan – a spine to hold up my finances. My future looked pretty bleak. I honestly had no clue how I was ever going to stop living paycheck to paycheck.
Turns out many Americans know what I’m talking about. Three out of every four people you pass on the street today are living paycheck to paycheck.
When I turned 25, something shifted within me. I looked back on the thousands upon thousands of hours and money I wasted by mismanaging my own daily spending. My husband and I stumbled upon a class called Financial Peace University and it reshaped our entire financial outlook.
The very first concept the class discussed was the need for a monthly cash flow plan. Was the information valid? Let’s take a look.
Breaking Down a Monthly Cash Flow Plan
What is it?
A monthly cash flow plan is a written map of where your money will go each month. Many people believe it restricts your freedom to spend as you wish, but it’s truly just a cataloging system. Could you imagine a grocery store keeping its shelves stocked with enough food without a catalog of its inventory? It’s the same in your own home.
Whether you have a single income, irregular, or multiple sources, mapping out the trajectory of those finances will help them arrive to their destination safely.
For example, it helped me reach my first milestone of $1000 in an emergency savings account.
How do you use it?
My husband and I meet once a month to plot out a spending plan together. Typically I prepare the monthly cash flow plan beforehand and present it to him. The meeting usually takes less than 10 minutes now that we’ve been at this for five years. It’s never perfect, but it’s always better than the alternative.
What goes on the cash flow plan? Everything. Food, bills, home repair fund, gas, giving. Try to get it all on there, but don’t expect it to go perfectly. The true strength in budgeting lies in the perseverance to live on your plan.
Want to know how to get started with budgeting? Read my breakdown on these printable monthly budget worksheets here.
Who is it for?
Everyone. Even my 3-year-old is learning the early concepts of financial planning. We chat about it in everyday conversation. When she receives a quarter after sorting some socks, for example, I talk with her about all the different ways she can spend, save or give that money. I talk about how many chores it would take for her to buy a new puzzle or her favorite ride at the mall.
And for the record, she’s a lot better at waiting for things than me.
So that’s the run down on why I think a monthly cash flow plan will help, rather than hinder, your financial future. Do you agree or disagree? Let me know in the comments below!
Image Credit: Gracey (MorgueFile)
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