Consider for a minute how your personal money is connected to your business money. You may be an owner and your credit score is now hurting a business opportunity; you may be a valued employee and your lack of savings is not allowing you to step into the role of an owner; or you may be a married owner who’s spouse is wondering when the pay-off is going to happen.
At Consilio, we concluded long ago that while the majority of our work is with people on their businesses, it would help our clients even more if we designed a personal cashflow system. We looked at the modern day factors and designed a system with as many good accounting principles as made sense.
My all-time favorite quote from my dad gets me through a lot of potholes in my money life: “An economic problem is the easiest problem to solve.” Keep his words in mind as you read about the elements of our personal cashflow system:
1)Stop writing checks and start using online bill pay and electronic payments/debit card (or credit card if you handle credit well). Checks used to be the only way, but now more vendors have figured out the cost to check-handling and are posting a ‘Sorry, we don’t take checks’ sign. The check ‘float’ is going away so if you are relying on this, understand that you have a limited time to enjoy its benefits.
2)Stop obsessively coding and start separating your expenses into only two buckets: consistent committed payments and fluctuating choice-driven expenses. Most people are on a continual search for the best way to code their purchases, hence the existent of systems like Mint.com. We don’t believe in excess coding given the time it takes you to do this—we’d rather see our clients use that time on something else. What’s most important is to know without a doubt what you have committed to, what choices you’ve made, and how to handle the excess or shortfall. In a personal life, the choices are as wide ranging as budget decisions in politics. The fence-sitters—those things that feel like commitments but could be solved in another way like gym membership, television, and doctor visits—may require hours of uncomfortable discussion. Whatever the decisions are, make them and understand the results they will have on your life.
3)Stop giving to charity and start paying yourself first. My own bleeding heart bled more as I typed that sentence. What I mean by this is, once you have a handle on your own situation and have built your own safety net, only then does it make sense to offer a commitment to the cause you love. Remember what the airline attendant reminds you of—put the air mask on yourself first before helping someone else with theirs.
4)Stop consolidating and start chipping away at your debt. Wiping a problem clean with one action is a mirage. Your debt was built over years of habit-driven spending which in the natural world of equity means the pay-off is going to be over years of habit-driven payments. Are you still with me? I know, it sounds like an insufferable problem but the light at the end of the tunnel is not a train. Keeping your momentum up comes from paying something off. Rather than concocting elaborate pay-off schemes, simply pay off the lowest balance first. Financial success comes from fixing the problems you have one focused step at time.
5)Stop making a giant to-do list and start making a reasonable action plan. Keep your to-do list, tiny at a mere six small actions per month. Often, the same people that struggle with money are optimists and ideators, and they make GIANT lists. If this is you, sprinkle in a dash of pessimism. It will take longer than you expect—and if it doesn’t you’ll have a happy surprise at the end.
6)Stop ignoring the details and start managing the details. The actions that trip up a financial world are minute—a wrong account number, a missing stamp, or no envelope. Success in money management is in the small wins and consistent actions. For years, I tried and built systems hoping that one of them would re-invent money management for all the creative souls in the world. The reality is that money management can be as dry as a desert and the details have to be taken care of by someone at some point. Much of the labor can be done by someone else (if you can afford it), but decisions (the really hard part) have to be made by you for it to work for your life. Abdicate the decisions and the result will represent someone else’s life.
7)Stop working alone and start work with another person. Personal money work is some of the most emotional-wrenching work in a life. It tears at the core of our human survival instincts, as it feels like our food and shelter is going to be ripped from our hands if we won’t work harder or worry more. Find that person or persons in your life that can you can hear the hard truth from, be there for you when it turns for the worse, and help you do math when your head can’t get out of your heart.
My parting comments are age-old but always appropriate: Work hard on this, keep your chin up and get help. It’s going to be OK.
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