Cash Flow: Part Three

In our series of articles on getting your financial life in order, we are just about through the initial phase, determining your cash flow. You’ve come up with a list of your income and a list of where that income goes. Now we need to make sure you didn’t leave anything out.

“But I already accounted for every cent I spend,” you may say. And you may be right, but I want to add in some categories that you should be setting aside some money for, even if right now that number is zero. This is where we begin transitioning from merely recording what you’ve been doing to determining what you want to do in the future.

Here are some of the categories that you might need to add to your cash flow list (even if you are not yet putting any money there):

• Appliances – this will help replace refrigerators, washers, dryers, televisions, computers, and all those other big-ticket items that wear out.
• Car Repairs – we’re not talking about an oil change, but those bigger problems like the transmission or water pump giving you trouble.
• Car Replacement – you may be financing that now, but we want to get you to the point where you can pay cash for a car and pocket the interest for yourself.
• Medical – for those procedures your insurance doesn’t cover or just to pay the deductible.
• Home repair – for that new roof, air conditioner, or plumbing repair that’s in your future.
• Education – if you anticipate helping your children or their children with college.
• Retirement – in case your anticipated Social Security retirement benefits don’t cut it as a comfortable lifestyle.

Add to these other areas that apply to your specific situation.

Yes, I know that these items may go above and beyond what you can do right now. For now just list the categories that apply to you. If you are not yet putting money there, you can leave the monthly dollar value at zero.

Now that your income and expenses are done, let’s look at your assets and liabilities. For this we’ll need more information from you.

If you have outstanding credit card debt, personal loans, home-equity loans, mortgages, car loans or anything else where you owe someone money, start making a list. On that list, have a column for who you owe the money to, how much you owe, what the interest rate of the loan is, and what the minimum monthly payment is. Also note if there is anything special about the loan, such as a balloon payment at the end.

Now list what you own. No, you don’t have to list the ceramic flower that Aunt Sue gave you. You can make the list as simple or as detailed as you want. Most people will just have a line for ‘household goods’ and lump the furniture, clothes, electronics, and all the stuff in the drawers and closets together. But if you own it, list it either by category or specifically.

We’ll deal with this list in the next article of this series and see what you’re worth.

Wichita Falls. You may e-mail him at Gary@PersonalMoneyPlanning.com

Gary Silverman, CFP® is the owner of Personal Money Planning, a financial planning and investment management firm located in