Issue #53: Cash Flow Flexibility

Cash Is King!

We all know this…right?

Our current world runs pretty much exclusively on money, some people are lucky enough to have a community that works for each other and barters. The other 99% are stuck with Money. More importantly CASH.

What do I mean by Cash? Cash isn’t an investment, it’s not in a retirement account, Cash is what is available to you when shit doesn’t go the way you planned. That will be what we mean by Cash today, because spoiler alert…SHIT will always happen to the best laid out plan. Since we know for a fact that an issue will arise we need “Cash Flow Flexibility”.

Run Your Life Like a Business!

Cash Flow Flexibility

Aka Financial Flexibility is a term used in the business world often, to have enough cash when unexpected expenses arise or better put having money available when “SHIT Hit’s The FAN”.

It truly is that simple and no I do not mean an emergency fund, that is included in the cash flow flexibility but it’s a wee bit more complex than that. Let’s discuss what all goes into Cash Flow Flexibility well at least my definition of it.

Mindset

Yes you hear me harp on having a positive money mindset, ALL the time. This cannot be more true for achieving cash flow flexibility. I say this because inherently as humans in this society we love to spend all our $$ and end up feeling guilty about it, then when “shit hit’s the fan” we end up going into debt, starting gofundme’s or asking friends/family to help. This is a derivative of have a negative money mindset, so in this issue just focus on being uncomfortable by telling your money where it’s going to go.

Efficient Budget

I don’t care how much money you make or have you will not grow your wealth or have a successful business if you do not have an efficient budget! The caveat there is it takes constant monitoring and adjustments to have an efficient budget.

So…WTH is an Efficient Budget? It’s a budget where almost every dollar that comes in the door has a job to do. Whether that be to go into savings, pay bills, investing in your mental health or putting food on the table, each dollar needs a job. We all get into trouble when we look at our checking/operating accounts and go “OoooOOOooo MONEY, I have extra I can spend”. When in reality it is needed for something way more important than a new pair of shoes or that $250 cut of meat (GUILTY).

In practice, your checking/operating account should essentially only be the leftover pennies from dividends received from the banks low AF interest rate or the few dollars the budget doesn’t use up, otherwise everything else is being used or moved to it’s own account.

Paycheck/bonus

We just spoke about making sure every dollar is working for you, well to increase Cash Flow Flexibility we need to utilize our paychecks correctly, which include those bonuses.

Some of you may remember filling out your W4 (see below)

Some of you may not! That is okay, mainly because we do not usually understand what the hell this is so we just put 0. Well this form dictates how much of your money is withheld for taxes and how much ends up being in your paycheck. You are able to adjust these elections, usually per pay period, so if you know a bonus is coming and you want more of it in your paycheck then, make that adjustment.

If you just elect 0, then the full amount withheld will be applied, likely leading you to a refund at tax time. That being said WE DO NOT WANT TO GET A REFUND! I REPEAT YOU DO NOT WANT A REFUND….why am I yelling at you? Well because if you get a refund that meant all year long the government was using your money and not paying you interest on it, the average refund is around $3k. Wouldn’t that $3k be better utilized for Cash Flow Flexibility?

Emergency Savings

They key to any “flexibility” is having immediate cash in reserves for the, unexpected chaos of life. So obviously building an emergency savings is ideal, I recommend starting a plan that allows for this account to cover your monthly expenses for 3-6 months and have this funded within 2-3 years.

Brokerage/Investment Savings

After Emergency savings, is our next line of defense if you will. That would be the brokerage account, yes the same one that can have stocks, bonds and funds as well. This savings account, we want to have funded to about 6-12months of your expenses, that amount we will remain relatively conservative investment choice with then anything above that we start utilizing for your long-term goals!

Retirement Accounts (any of them)

First and foremost, get the free damn money from your employer if it’s available, meaning that Match % they give you on your 401k…contribute at leas that amount so you can get your free money in form of a match!

Next, let’s wait on putting your money in until end of year or during tax planning. The main and only reason for this is the ability to have the utmost flexibility for your Cash. What about missing out on market gains? Well two trains of thought here, one being you can invest in your brokerage all year long then deploy into retirement accounts (IRAs specifically) when tax planning is done or you keep in a High Yield Savings account and take on the risk that the market might do very well but again we do this technique because of having the most cash flow flexibility.

Luck

End all be all, LUCK is the biggest factor. No matter how much we plan or don’t plan, if we can AVOID “shit hitting the fan” then we will come out ahead, that I can guarantee! ?? Yes I said Guarantee.

Just Get Started

To summarize all of this up, if you want to max out cash flow flexibility, get your mind right, create an efficient budget (that you can follow), then get your paycheck in order, start building emergency savings and brokerage savings, only put in your retirement (after match has been met) when tax planning comes around and lastly…be lucky!

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Next Week’s Issue

Benefits Season is upon us again! So over next few issue’s we will be speaking about what you need to do.

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Oh, yeah and have to put this in here...Compliance and all

“The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments may be appropriate for you, consult with your financial advisor.”