Cash flow planning help

After the cash flow planning / budgeting week, you may be a little overwhelmed by all the paperwork Dave recommends to manage your financial life...each month. People often ask me, "Do you really do this?" I can assure you that I do and I can assure you that I don't.

Let me explain. I don't complete all the paper forms, but I have a spreadsheet that includes all the forms and I plug our numbers into that every single month, adjusting until income minus expenses equals ZERO. And it takes just a few minutes. Carrie and I discuss it and agree to the plan. We use the cash envelope system, which reduces the workload through the month. And I can assure you that it works.

Keep in mind that once you get the kinks worked out of your budget many of the line items don't change. That is why I encourage people to do the hard work and commit to stick it out for 3 months at least before deciding how doable it is.

And when it comes to the envelopes, here is how we do it. When we take the money out for groceries for example, I count that full amount as spent for the month. I don't track our spending within the envelope, if that makes sense. Some people do. I don't. So instead of 6 or 7 or more transactions for groceries, I record only one each month. This makes the tracking very simple. And Carrie doesn't have to call and ask about buying something. As long as she stays within the cash allotted for a category, she has total freedom. She likes that!

Below are some online money management tools you may want to check out. They do the math for you, making the process of of adjusting to zero much easier. These are great tools that will help you to WIN.

• Dave Ramsey's Gazelle Budget Software (available free for members during FPU)

https://mrc.daveramsey.com/

This is the real deal right from the source. You get access to all kinds of tools, help and encouragement to keep you "Gazelle Intense" on your journey to Financial Peace. This is an incredible tool I encourage you to check out.

You can also buy the software on CD for $18.95 at http://www.daveramsey.com/store/budgeting-tools/budgeting-software/cBUDGETING-cBudSoft-p1.html

The CD software is PC-only. Dave often offers it on sale for only $10.

There is a "Lite" version of the budget form you can use without login at:

http://www.daveramsey.com/tools/budget-lite/

Just print it off after completing the form.

• Mvelopes

http://www.mvelopes.com/

This is another amazing online software system that is available for a fee. It can connect with your accounts online if you want for it to automatically download transactions. You can make adjustments from there if needed. It uses a virtual "envelope system" to track you budget-to-actual and keep you on track. You "fund" the "mvelopes" and spend from them online, making tracking very easy.

• Mint.com

https://www.mint.com/

Mint has become very popular because it also connects online with your bank and other accounts and because it is free. It automatically assigns expenses to budget categories based on the place of purchase (for example, if the purchase is from a grocery store it determines the expense to be groceries). You can make adjustments as needed. Mint does collect data about your finances anonymously, which is a concern for some.

• YNAB (You Need A Budget)

http://www.youneedabudget.com/

YNAB is available online or you can purchase the software for PC or Mac. It offers lots of online resources to help you understand how to use the YNAB system. YNAB is a great tool, available for a fee.

• Pear Budget

https://pearbudget.com/

Pear is a simple but powerful budget system offered for a small monthly fee. Pear Budget "Uses the classic “envelopes” method of budgeting, but updated for the web. Fans of Dave Ramsey love us!"

• Microsoft Excel or other spreadsheet software

If you are comfortable and familiar using spreadsheets and would like me to email you forms in this format, just let me know and I will send you what I use.

Some people like the manual forms. Others prefer different software tools. Find what works best for you and that you will use ongoing. Make it a habit!

Most importantly and this is true always...if you need any help or have questions, please contact me. I am here to help in any way I can.

If you don't read anything else today...

I ran across a couple of old posts in another blog that I wanted to pass on today. These are excellent in many respects and I wanted you to read them and apply them to your life.

http://www.leadingsmart.com/leadingsmart/2006/08/it_just_makes_c.html

http://www.leadingsmart.com/leadingsmart/2007/03/lets_give_1_mil.html

By the way - thanks for reading. I should post more often or in a predictable pattern...maybe I'll set that as a goal in the next few months...maybe! I appreciate your involvement in this blog by reading, considering, applying, and occasionally even commenting. I just wanted to say, THANKS!

How do you deal with disappointment and setbacks?

I recently got a phone call that dealt me an unexpected setback - to the tune of about $3,000. It affected my debt repayment schedule primarily, which has been a big focus of mine this year. Do I need to write that I was disappointed? I think we each face disappointment and setbacks on an occasional, if not regular basis. What to do? How to respond?


These are but a few thoughts on how to move through and move ahead anyway:


1) Guard your focus.


Don't spend inordinate amounts of time rehearsing the disappointment. It will kill your creativity and hope for life beyond. When you keep hope alive and look beyond the immediate obstacle, you rise above the obstacle that disappointed you and be able to see and chart a course to move ahead. My Pastor says, "You can't lay back in a setback." Well, you shouldn't anyway.


2) Adjust your plan.


This is why a plan is so important. If you have a plan there is action you can take against your disappointment. I am coordinating my third Financial Peace University class. We are working through Week 3 - Cash Flow Planning. It is foundational to the class, just like a plan is foundational to life. We are better able to navigate the waters of disappointment and setbacks if there is a plan. The setback can be addressed - adjust the plan to compensate. Now work the new plan. It makes it much smoother. With no plan, the setback causes chaos and debilitating disappointment. So if you don't have one, make one now!


3) Don't fret what you cannot change.


If we can get this one planted deep inside, our worry will diminish, peace will increase, and the disappointment will loose its power. Disappointment is tied to expectation and can be a powerful weapon against your future, your peace, and your success. It is why so much of our economy is tied to "consumer confidence." Especially at the start of difficult economic times, very little has fundamentally changed in people's lives. But as confidence wanes, people pull back, thus creating the very problem they fear. It's an interesting cycle. Don't let things out of your control rob you of peace, joy, and right-thinking.


4) Be thankful!


Motivational speaker, Bob Harrison, tells a story that has been a huge help to me when I am facing disappointment - and it relates back to #1. Years ago his marriage was in trouble and he was praying about his wife and complaining to God about the many ways she was falling short. God encouraged him to make a list of her good traits - the things he was thankful for - and pray through that list every morning instead of rehashing his disappointments. As he did that, over time, she changed...or maybe she didn't. Maybe the problem was in his focus on the disappointments and his lack of thankfulness. In reality, she did change in response to the change in his attitude toward and treatment of her. And it all grew out of his choice to be thankful for the good things. There marriage was saved and grew into the beautiful thing God wanted it to be.


Something is going well. If nothing else, you are still breathing. If nothing else, God is still God, whether you feel like He is or not. Find these things, write them down, and be thankful for them.


5) Pray.


Another thing my Pastor says is, "You can do much more than pray, but you can do no more until you have prayed." Remember that God has not promised only good things in your life, but He HAS promised to work ALL things - good and bad - together for the good of those who love Him and are called according to His purpose. That is YOU - or it can be if you choose.


I'd love to read comments on things that help you overcome disappointment and setbacks.

On taxes, the wealthy, and spreading it all around

Join me, if you will, on a little anecdotal jaunt... On second thought, let me warn you that you may not want to. This could be painful or even maddening to you. Ok, if you aren't up to reading the tough stuff, just skip to the end.

There has been a lot of talk in the news lately about these implicitly selfish wealthy people and the weak middle class. Now I fit firmly within the middle class category, so nothing I write is from pure self-interest. But I have been thinking...

Most people by now surely have heard that the top 1% of taxpayers pay around 35% of all federal income taxes; the top 5% pay around 55% of the whole; the top 10% pay around 66%; and the top 25% pay around 84%. No matter on what the latest or most precise percentages are because the general idea is clear, and this post is all about general rules. They do, after all, become general rules because they generally are the rule.

There is no reason in the United States today that everyone cannot be a millionaire. Well, there is a reason, but I'll get to that later. The formula is very simple.

Like I said, I have been thinking. What makes rich people rich, middle class people middle class, and the "underprivileged" poor? In general terms, the same reason everyone is not a millionaire. Follow with me...

When wealthy people make lots and lots of money, what do they do with it? Let's see...they buy nice homes (except for Warren Buffet), they buy expensive cars (except for Sam Walton), they buy other stuff, they invest, they save, and they give. I notice their names on university buildings, hospitals, and church wings (for those churches that put names on wings). No, it seems the wealthy spread their wealth voluntarily to accomplish a number of charitable purposes. So why does the government need to get involved? And anyone in nonprofit work knows how most organizations are able to do extraordinary things because of the extraordinary generosity of a few, to whom much was given. Interesting.

So I'm curious, would raising taxes on the wealthy beyond the great amount they already pay be an attempt to shift those dollars away from charity to the government? Would the government be better at determining how to use those dollars for social good than the donors who actually earned the money? I am envisioning foreign countries I have visited. They have a "strong" middle class that relies on government to do and build everything. There are no names on hospitals or other "institutional" buildings. The wealthy are those in the government bureaucracy or with close ties and they don't do much charitable giving except with public money. Government is strong. Charity is weak. Okay, so that was admittedly a rant. But it's my blog and you had fair warning.

What about the middle class? What might we do with a raise, a bonus, or a tax refund check? Move toward becoming wealthy? WE PAY OFF DEBT, right? Now that is a great answer. But it begs the question, where did the debt come from? The answer to that question can often be found in another question. Why does the middle class stay the middle class over long stretches of time? Ouch. We stretched on the home purchase, filled it with nice furniture, kept up on the latest gadgetry, and entered the process of either leasing or making perpetual car payments. Middle class neighborhood are filled with all the stuff of wealthy neighborhoods but lack one fundamental similarity - the money to pay for it all. We have no savings, our giving is pathetic, and investing is out of the question.

This one could be touchy. The "underprivileged"? I have seen many people face insurmountable odds, but make wise choices, and press through to thrive. These were most often uneducated and certainly underprivileged folks. For example, most of our immigrant populations. And the Jewish communities that have faced persecution and discrimination that have thrived with little intervention. I recently heard of a local country club that opened up membership to Jews within the last 7 - 10 years. Astounding. Anyway, so what keeps poor people poor over long periods of time? And I could ask along with that, who has seen the greatest success in actually combating poverty in the United States - government or charity (so should we raise taxes or incentivize wealth and charitable giving)? When poor people receive a windfall, they rarely know exactly where it went, but certainly it is gone. It might go to the retail shopping outlet, a car dealership, or any number of places. I would venture to say it never goes to charitable giving, saving, or investing.

Poverty is a curse. The way to fight it is to get people out from under the curse, not to throw money at them. Studies have shown that if the world's wealth were evenly distributed, disparities would return within 6 years I believe. As the old proverb says, "A fool and his money are soon parted."

Thank you for letting me get all that off my chest. I feel better now.

Now for the reason everyone in America today is not a millionaire...

Yes, if you have read many of my posts you might have guessed it - BEHAVIOR - and that starts with you, not the government (not even the president).

So let me give you a little formula for success that I may have previously shared.

Give.
Save.
Then spend.

Or, as financial expert Ron Blue testified before Congress, "Live on less than you make. Then save and invest the difference over a long period of time."

You can do it. It is up to you. When your behavior follows these steps, mathematics takes over and abundance is automatically created. No matter who is president and no matter what the tax rates become, following these principles will naturally lead to wealth and success. And what do you do then (besides pay more taxes)? As Dave Ramsey says, "Once you have lived like no one else, you can live like no one else and you can give like no one else."

Don't wait on government. And don't worry too much about government (but DO get informed, think it through on your own - don't just listen to campaign rhetoric - and VOTE!). I could go on for hours, but I'll stop. Let me leave you with this verse that stretches out over this whole discussion-

"11Your power is great, and your glory is seen everywhere in heaven and on earth. You are king of the entire world, 12and you rule with strength and power. You make people rich and powerful and famous. 13We thank you, our God, and praise you. 14But why should we be happy that we have given you these gifts? They belong to you, and we have only given back what is already yours." 1 Chronicles 29:11 - 14 (Contemporary English Version)

Read it in several versions to let the truth get planted deep within you. And remember what my Dad told me right about this time of year in 1992: "That's why we put our trust in God instead of men." Wise words.

Seasons of Correction

"...[E]conomic conditions influence homeownership. The rate [of home ownership] fell during or immediately following most business-cycle recessions, with the most sizable and lasting decrease taking place after the double recession of 1980-1982. The only recession that did not result in a downturn in homeownership was the recession in 2001, a period of extremely loose monetary policy." (emphasis mine)

- Commentary by Polina Vlasenko posted by the American Institute of Economic Research (http://www.aier.org/research/commentaries/533-home-ownership-in-the-united-states)

I think it is notable that the blowout in the housing market and economy came after the government intervened in the natural course of things in 2001 with "extremely loose monetary policy." People were overspending, buying houses beyond their means, and rather than allow or even encouraging wrong behavior to be corrected, the government did the opposite. So people pressed on in ignorant bliss until it eventually, it all began to fall.

Market corrections are natural. They fix problems that exist in the markets. They clear the incompetence from certain workforces. And they should be allowed to occur (perhaps even embraced). Corrections, pullbacks, and downturns are natural seasons of life. And like the four seasons, each passes with time into a new season. Important things are happening in the process. Lessons are being learned.

If you are expecting the government, or the next president to solve your problems, it won't happen. There are success stories during all economic conditions - and they didn't originate in Washington. Take the reigns of your problems and go to work making a plan and following that plan. Your life should not be governed by the media, economic conditions, or who is in the Oval Office. One of Stephen Covey's Habits of Highly Successful People is being Proactive. Happen to your life. Don't wait for someone to fix your problem.

Opportunities still abound in this great Land. Jobs are still being landed. Businesses are still being formed. Houses are still selling (even in Michigan).

If you have made a big mistake, there may be some consequences to pay. Take the hit, make the change moving forward, and head toward a better and wiser future. It is going to take hard work and exploring lots of options. Apply again. Make some more phone calls. Try a new agent. Keep exploring. Keep trying. Never Give Up! Persistence is the key.

A common list of the failures of Abraham Lincoln (along with a few successes) is:

1831 - Lost his job
1832 - Defeated in run for Illinois State Legislature
1833 - Failed in business
1834 - Elected to Illinois State Legislature (success)
1835 - Sweetheart died
1836 - Had nervous breakdown
1838 - Defeated in run for Illinois House Speaker
1843 - Defeated in run for nomination for U.S. Congress
1846 - Elected to Congress (success)
1848 - Lost re-nomination
1849 - Rejected for land officer position
1854 - Defeated in run for U.S. Senate
1856 - Defeated in run for nomination for Vice President
1858 - Again defeated in run for U.S. Senate
1860 - Elected President (success)

You might notice, he never gave up.

Galatians 6:9 (TNIV) says, "Let us not become weary in doing good, for at the proper time we will reap a harvest if we do not give up."

As always, if I can help you walk through an issue in your life, please contact me.

Just Do It!

I'm tired. I've been busy. I haven't been as productive as normal. I haven't written my weekly blog for a few weeks. A lot of life has felt out of my control. So what's the problem here? ME!

My attitude, my actions, my discipline, my responses to circumstances and even feelings all have one thing in common. They are mine. I can allow them, adjust them, change them - whatever. It's up to me.

One of the things that slid this month was creating our family budget (I just finished it last night - 8+ days late). I was on vacation (excuse), then I was catching up at work (excuse), and meetings, responsibilities, interruptions (excuse, excuse, excuse)...

Cash flow planning (budgeting) is the fundamental key to success with money. A new budget should be in place and agreed upon by spouses before the month begins. But it is also the hardest thing to implement and maintain - especially when we don't feel like it.

Winning with money is all about BEHAVIOR. That's why it is so hard. If we don't change our behaviors, our finances won't change. If we do change our behaviors, our money situation will change, too. Make a plan and stick to it! Write it down and evaluate it weekly.

When it comes to doing these hard things, I often think back to what Dave Ramsey say in the first lesson of Financial Peace University: what if my child's life was on the line? It was all up to me. Could I find a way to get this stuff done? YOU BET! I could. It's a morbid question but it makes the point--

IT IS POSSIBLE. NO MORE EXCUSES! It is a question of priority and willingness to DO WHATEVER IT TAKES.

I believe there are only two reasons why we have financial distress:

1) We have made a decision that is out of our financial position (e.g., bought a home or car with a payment that throws the fixed expense out of line) or

2) We are not managing our money well.

To fix 1), SELL IT.

To fix 2), BUDGET IT.

But no matter what, in the immortal words of Nike, JUST DO IT!

I plan to...

I talk to people daily who say, "I plan to...." I now reply, "Really? Let's see it." They normally respond with some variation of, "Huh?"


The oft quoted rule of law states, "If it is not in writing, it never happened." Consider this: "If it isn't written down, it won't happen."


It is amazing how we (yes, me included) approach lifetime goals and make important decisions without a plan that's specific enough to get us anywhere near our desired destination. We plan to... but we don't really have a plan.


Related to their finances people often say, "We try to save money, but we never seem to get anywhere." Again, I ask, "Let's see your plan." And get the normal reply. Financial expert Dave Ramsey often says, "Normal is broke. Be weird!"


If you plan to go on vacation next summer, what is your plan to pay for it? You need to have a plan. If you plan to buy your kids Christmas gifts, what are you saving toward that each month? You need to have a plan. If you plan to ever re-pace your work schedule (sometimes called retirement), how much do you need to save to draw from during those years? You need to have a plan. Few people like the word, budget but practically, it just means, money plan.


A monthly family budget needs to include all the things we plan to do. We plan to pay our rent or mortgage payment, utilities, groceries, etc. But what about the other planned spending (e.g., gifts, vacation, insurance, taxes, etc.)? Writing all of this down on paper before the month begins is a vital component to your financial success. Each month should begin with this plan in place.

• Write it down

Spend every dollar you are going to receive - on paper, on purpose. Spend each paycheck in order of importance and due date until you have used the entire check on the page. Your most important plans should take priority. If you are struggling, start with food, shelter, utilities, transportation, and clothing. These are the basic necessities of life. Take care of them before anything else (and even if someone else doesn't get paid this month).

• Agree on it with your spouse or accountability partner

Those of us who are married MUST work together if the money is going to work. Some need accountability so as to not make impulse buys. Others need the input from their spouse so the family actually has a life (I tend to squeeze the budget so tight there is no money for fun)! Both spouses have a voice in the process. Singles need the accountability of a trusted friend who is willing to ask tough questions. They don't have a say in the final decision, but wise advice should always be regarded.

• Review it weekly for changes and to stay on target.

Remember, you have spent every dollar you are going to receive, so if there is a change - either an expense that was greater than planned or something unplanned, you will have to find the money somewhere else. But you are making the decision on purpose. You are making decisions based on true priorities - what is most important. These offsetting adjustments force you to stay within your total budget.

As is often the case with topics related to money, planning affects many other areas of life. If you plan to improve your marriage or other relationship, you need to have a plan. What are the steps you are going to take today...tomorrow...next week.... If you plan to get married, you need to have a plan. What characteristics are non-negotiable? If you plan to move ahead in your career or get a better job, what are you doing to move that direction? Is there a class you need to take or training you need to go through?

In our pursuit to be more like God, we have to ask the question, "What is God like?" I know one thing - God has a plan - and He wrote it down.

In the Bible Jeremiah the prophet wrote to the people of Israel who were exiled in Babylon, "For I know the plans I have for you," declares the Lord, "plans for wholeness and not for evil, to give you a future and a hope." (Jer. 29:11) I believe these words hold true for the people of God everywhere.

On the other hand, 1 Peter 5:8b says, "Your adversary, the devil prowls around like a roaring lion, seeking someone to devour." It is important that we realize that if we don't have a plan, someone has one for us!

We all need to have a plan for our life and our money - written down - and it needs to be God's plan. The alternative it not pretty. I have seen estates, budgets, families, and individuals "devoured" by nothing more than lack of planning.

Take the time. Develop your plan. Write it down. If I can help in any way, please contact me.