Thursday, June 20, 2013

Five Step Cash Flow Program for Parents - Step Two



Once you have accumulated all your financial information you need to start putting everything together. 

Most families do not keep track of how they spend their money on a monthly basis, and therefore, their spending controls them.  This is no way of running a household.

Most parents do not realize they have two jobs, (1) the one they work nine to five every day and (2) the one that they go home to every night.  If you were to ask yourself, “Of these two jobs which one would be the most important to you, what would be your answer?”  

Most of you would say job #2.  This is the right answer, but if you were evaluated on the job you have at home (financially) like you are evaluated at the job away from home, most of you would be fired within a few months for mismanagement of company finances. 

Therefore, you must understand how you are spending your money (
job 2) and by knowing what you are spending your money on will benefit your family as a whole and give you an opportunity to make adjustments in managing your cash flow.

I suggest completing the Household Expenditure Sheet.  The reason for this is you want to see how you are spending your money.  You should remember you are the only one that can control your spending. 

Plus, if you do things correctly you cannot depute your own figures.  Once again you are the only one that can control your spending.

The Household Expenditures Worksheet allows you to take control of your  spending by documenting exactly where your money is being spent, just like the company you work for from nine to five.  Most families cringe at the thought of documenting all their household expenditures.

However, once you recognize you bad spending habits, then you can take the necessary steps to adjust your spending in a positive direction.

If you take the time to complete the Household Expenditures Worksheet, you may be astounded to find that a few simple adjustments in your monthly spending habits can dramatically increase your cash flow for college, without changing your present lifestyle. 

How To Use The Cash Flow Sheet

The main purpose of the cash flow expenditure sheet is to see where and how you are spending your money.

Once the sheet is completed you should look at your fix expenses first and then your variable expenses next.

Pay close attention to unnecessary spending such as large TV cable bills, cell phone charges, spending money, lunches, recreation, and allowances.

Once you add up your total monthly spending, compare this amount with your NET INCOME (after tax income) from your income tax returns.  You should see an imbalance in these two figures. 

This imbalance could be negative or positive.  Most of the time it should be positive (have more cash available than you recorded on the cash flow sheet).

Look at your last two-paycheck stubs.  Add up all the deductions that are being withheld from your paychecks (health insurance, 401-k, group life, group DI, cafeteria plans, etc.)  Add these expenses to your total monthly expenses and then subtract the adjusted cash flow from your NET INCOME (after tax income.)

If you are getting an income tax refund, (federal and state) add this additional income to the total available income. 

Now you know your TOTAL AVAILABLE INCOME.  Most of the times you will see an imbalance between what you say you are spending and what you are ACTUALLY spending. 

In 80% to 90% of the cases you may not be able to account for $200 or more in spending that you do not know where it is going.  This is money that can be used to help pay for college, reduce debt, or up grade your life, DI, retirement contributions, etc.

On the next few pages you will find the cash flow sheets that I use.  If you prefer to use your own that is O.K. just make sure you cover all the items that I have listed on the cash flow sheets.

Some of the items you will see (*) a long side the items ▬ below is an explanation

*  Do not include these items if they are deducted directly from the clients paycheck

**  Monthly/annual savings and investments contributions are considered to be long-term if they are held for three years or more.  Money in long-term savings should not be used to pay for vacations, holidays, birthdays, anniversaries, insurance, home, auto repairs, or taxes as these items are already covered separately in the Household Expenditure Worksheet.  


First Mortgage (primary residence) $ __________

Second Mortgage (primary residence) $ __________

Equity Line of Credit on Primary Residence $ __________

First Mortgage (second home) $ __________

Second Mortgage (second home) $ __________

Equity Line of Credit on Second Home $ __________

Total Property Taxes $ __________

Rent $ __________

Homeowner’s/Renter’s Insurance $ __________

Utilities $ __________

Telephone $ __________

Trash $ __________

Water $ __________

Sewer $ __________

Home Repair $ __________

Personal Loans and PLUS Loans for Student $ __________

Cable TV $ __________

Auto, Boat, RV Payments $ __________

Gas, Oil, Tire, ETC $ __________

Auto, Boat, RV Maintenance $ __________

Auto, Boat, RV Insurance $ __________

Auto, Boat, RV License(s) $ __________

Sundries $ __________

Groceries $ __________

Clothing $ __________

Dry Cleaning $ __________

School Related Expenses 

(Books, supplies, clothing) $ __________

**Long Term Investments $ __________

School Tuition, Fees, Room & Board $ __________

Medical/Dental Deductibles & Co-Pays $ __________

Tax Preparation Fees/CPA etc. $ __________

Drugs/Medical Supplies $ __________

*Health Insurance $ __________

*Disability Insurance $ __________

*Life Insurance $ __________

Church Donations $ __________

Charitable Donations $ __________

Vacations $ __________

Holidays $ __________

Birthdays $ __________

Anniversaries $ __________

Association Dues $ __________

Clubs & Organizations $ __________

*Professional Dues $ __________

Magazine/Book Subscriptions $ __________

Newspapers $ __________

Entertainment $ __________

Rental Movies $ __________

Children’s Allowances $ __________

Sports/Hobbies $ __________

Credit Card Payments $ __________

Annuity Investments (non-qualified) $ __________

*Pension Contribution $ __________

*Local/State/Federal Taxes $ __________

*Social Security Taxes $ __________

**Long Term Savings $ __________

Other/Short Term Savings $ __________

Cash Spending Money $ __________



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