My #1 cash flow calming tip!

Recently I was a guest on a podcast. (With a former student of mine, who is now in his 30s..............yes, I'm old.......lol)

I was asked to give my #1 tip for calming cash flow chaos.

I know what you are thinking................use CASH! (I do love this tip, btw, as it has been shown to reduce your spending by 25%).

But once I started reflecting on what has made the most impact on my personal cash flow (and that of my clients), I'd actually say it was a toss up between our weekly spendable (which is cash based) and establishing life jacket funds.

Forced to pick a winner.............I went with my gut and blurted out "establishing life jacket funds".

What the hell are life jacket funds?

Most people call them sinking funds. But I'm not most people.

I don't like the negative vibe of the the title "sinking funds" so I decided to rename them in a more appropriate (at least to me) fashion.

Life jacket funds are savings accounts where we save for irregular expenses that may put your cash flow into chaos.

Thus by saving regularly for these irregular costs, we prevent our cash flow from drowning (hence, life jackets).

And that's exactly what life jackets have done for the cash flow at my house.

It has allowed us to smooth out and calm the choppy waters that can be cash flow, so that when an unexpected (not the same as emergency, btw) cost comes up, we are prepared and able to handle it, without dipping into credit to cover it.

Establishing Life Jacket Funds

There are 3 steps to establishing your life jacket funds..................................(it's easy as 1,2,3.............if you are singing in your head right now, you are my kind of people).

1. Identify the types of life jackets that you need.

There are typical life jacket funds that most people need...................such as gifts and holidays (Christmas is damn expensive), vacations, kid's activities, and car and house repairs (btw, it's not an emergency fund situation when your car breaks down.............if you own a car, it will break down, so you need to plan accordingly with a life jacket fund).

Most people also have unique life jacket funds depending on their life costs and what they value spending their money on. (For example, shockingly I have a golf fund................because I'm an addict. And instead of absorbing the cost of my golf all in the 3 good summer golf months we get in Canada, I save monthly all year in order to afford what I care about).

2. Open SEPARATE life jacket funds for each category.

I often get kick back on this one.

People want to open one account and shove their savings all into the one account.

PROBLEM!

How do you know how much savings is earmarked for car and house repairs versus vacation?

Here's the scene...............you open up your Wealth Simple app (more on that in a second) and take a look at the big chunk of money, feeling like you are winning at life................and then find yourself booking a vacation with that stash of cash.............only to realize (when you car breaks down on the way home from the airport), that you spent your car repair stash of cash on your vacation.

YIKES, back into cash flow chaos.

Separate accounts for each life jacket fund makes it extremely easy to see exactly what the money is to be used for.

"But I don't want to pay fees on my 6 separate life jacket funds".

This is where Wealth Simple comes in. (or EQ bank or NEO)

Make sure you are opening your life jacket accounts in a high yield savings account. And make sure they have no fees.

Wealth Simple allows you to open up to 8 different life jacket accounts, all earning 4% interest, no fees. (So does NEO and EQ bank).

The only reason I am currently loving Wealth Simple is that they are CDIC insured, up to $500,000 versus $100,000 at NEO and EQ bank. (CDIC insured just means that if something happens to these institutions, you would get your money back up to the insured amount from savings accounts or GIC products...........does NOT include market based investments like stocks, etfs, mutual funds, etc).

3. Identify the monthly amount to be saved, and start saving!

This is typically the hardest step for most people.

They are unsure how much to allocate to their life jacket funds on a monthly basis.

And I'm here to tell you, it takes a bit of work........along with some trial and error.

There are two ways to handle figuring out appropriate amounts to save monthly in your life jackets.

First, you can get your hands dirty and take a look back at your spending in the life jacket categories over the last 12 months. (This would mean going through your ACTUAL spending by looking at your bank and credit card statements and categorizing it. )

Be careful when doing your own analysis.........far too often I see people "estimating" their numbers, and using the estimates to build their life jacket fund. Estimates can contribute to your cash flow chaos if they are leaving you grossly underfunded when the expense hits. (This is why I love our Money Fix Analysis(see below) so much...........no estimating, only fact!)

Second, when working with me in either my group or individual coaching program, I do the analysis FOR YOU! (Which means no wasted hours on your end trying to figure out an appropriate amount).

The Money Fix Analysis is invaluable in that it identifies where you have been spending your money, and the exact amount to be saving in each life jacket fund.

And once you have your amount, VOILA, you can set up automatic monthly deposits into your life jacket funds and feel the cash flow calm wash over you!

And that's it for my #1 cash flow calming tip................but [FIRST NAME GOES HERE], I would love to hear from you.................hit REPLY and let me know what your #1 cash flow calming tip is!!!

Cheers,

Angie

P.S. Here's a link to book a complimentary chat if you'd like to learn about how I can help calm your cash flow chaos.