Feel Like You’re Choking Financially? Here are 3 EASY Cash Flow Fixes Everyone Should Do

I’ve written before about that choking feeling you may get when you think about your finances. Many times that feeling comes from a cash flow problem commonly known as, “living check to check.” There are a few easy things you can do to ease a cash flow problem.

Cash flow is about timing and organization. When you have money coming in and when you don’t. People who make $30k or $300k per year can have a cash flow problem if they don’t plan well. Usually, people have cash flow issues if one or both partners are not salaried employees, or, of course, you are chronically spending more than you earn.

Here are the top 3 financial tips I give people with cash flow issues:

  1. Get your {insert expletive here} reimbursements in on time! Your health insurance forms, your work expenses or whatever. Why are you lending money to insurance companies or your employer? That’s what you do when you let them take more than 30 days to pay you back. Have one day each month (maybe your admin day) and do ALL your reimbursements. No excuses.
  2. Use a credit card for all purchases IF YOU ARE IN CONTROL AND NOT AT RISK FOR OVERSPENDING. If you charge gas, food, house items, clothes, etc., you get one itemized bill you can pay off completely on one day each month instead of needing cash almost every day of the month. You can plan for the day you have to pay it, and make sure there’s enough money. DO NOT DO THIS IF YOU FEEL YOU MAY SPEND MORE THAN YOU CAN PAY OFF AT THE END OF THE MONTH.
  3. Be consistent with your expenses. Put as many things as possible on auto-pay and do not wait necessarily until the last day they are due. Pay them when it is convenient to your cash flow. Also, buy gas, groceries, yoga class passes and other predictable expenses on the same day each week or month so you know when you have cash for them.

I like to give clients an actual calendar. Yes, a piece of paper with a one month calendar on it. Sounds archaic, but the visual helps a lot of people. You will be able to see when you have the cash to buy yoga class passes, or wash the car or whatever. Look at it! Soon you’ll know it by heart. Write down when you’re paid and when bills are due.

Have one or two admin days every month (same days, please). You will have to sit down and pay your bills all together. That mere act will allow you to focus on your finances and know your bank account better. You will not feel like you’re paying a bill every other day and running on a treadmill. Do not dismiss this because it is psychological. After all, that choking feeling is psychological, also.

If you (or your spouse) do not receive a regular salary, make sure you (or your spouse) “pay" yourself from your business account (you have a separate business account, right?) on the same day (or two days) each month. Acting like you have a salary even though you're just transferring money from your business account to your home account goes a long way to calming cash flow anxieties because it is predictable. Ahh…. Planning and consistency…. Omm….

Marriage: Combined Accounts or Separate? One is Definitely Better and Here's Why.

I work with a lot of newlyweds and not-so-newlyweds to combine accounts as part of their overall financial planning. As a financial planner, I believe there is far more accountability and clarity with combined accounts, which leads to less cash seepage and waste.

I’m not saying you can’t have that pair of shoes, gadget, or whatever. I am saying you will spend less and save more if you have only one active account for the household. I’ve seen it a million times, and every time people with separate accounts:

  1. Did not know how much money they spent in total as a household each month (not just on household items);
  2. Did not know how much money they made in total each month; or
  3. Spent MORE as a result of their separate accounts.

From a financial planning perspective, there should not be any funds that one partner does not know about.

Here are the most common reasons I’ve heard and inferred from clients’ hesitation at giving up separate accounts:

  1. I need my own money where nobody asks me what I spend it on
  2. I don’t want to ask anyone else for money or permission when I want to buy something
  3. I want to know I have some money in case something happens

Number 3 is a reason to see a couples’ therapist. You’re in this together and if you’re legitimately worried about having funds for an ‘escape’, you and your partner should look into counseling. Let’s look at numbers 1 and 2. Essentially, they are saying the same things, which is I want my financial independence and I don’t want to answer to anyone about my purchases.

My perspective as a financial planner, is YES, everyone should have a pot of money they can do whatever they want with and will never be asked about it. In fact, calculating this “full discretionary” pot is part of my planning process for my clients.

The difference between separate accounts where whatever is left over is for you to spend and a combined account where both partners have a full discretionary pot each month is both partners have a view of the overall household finances and decisions are made as a household and not two separate people. Also, small point, but both partners are valued equally not based on the jobs they have... that's a story for another post.

As long as each partner does not spend more than their full discretionary amount, purchases cannot be questioned. Then both partners can know their total monthly income, expenses, savings for goals or funds to pay down debt AND the amount they get for full discretionary. Full financial awareness for both partners!

I say this at every seminar or talk I give: the key to personal financial planning is KNOWING, so why would you want a system that generates an inherent LACK of knowledge. I'm no psychotherapist, but maybe your partner's “lack of knowledge”, relieves some fear or provides some security or power . Ask yourself what you’re afraid of...

Relax, but Review: 3 Reasons You DO NOT Need an Identity Theft Protection Service

I’m sure all of you have heard commercials for or received emails about Identity Theft Services like LifeLock or IDGuard and thought, “I’m afraid of having my identity stolen, maybe I need that?” Well, it’s seems reasonable enough, but actually, it’s NOT WORTH paying for one of these services in my opinion.

First, let’s differentiate between identity theft and credit card fraud.

People confuse the two, but ramifications for you as the victim are very different. Credit card theft has limited liability for you, the victim and Identity theft can be devastating and time-consuming to fix.

Here’s 3 reasons why I don’t believe it’s worth paying for an Identity Theft Protection Service:

  1. Monitoring services find fewer criminals than you do (and a lot fewer than your credit card company). The Department of Justice found that over 50% of account fraud was discovered by banks or credit card issuers, 33% was discovered by account and card holders (that’s you) and less than 1% was discovered by identity theft and credit card monitoring services.
  2. Most theft is credit card fraud where the victim's liability is limited. Of the 13 million “Identity frauds” in the last year, 81% are credit card (or card number) thefts. Credit card theft is up 46% from 2012 to 2013, which means you should be careful about how you use your card, but your liability for purchases made on a stolen credit card is about $50 and that amount is also usually waived by the card issuer. Not to say we want more credit card fraud, but it is not the nightmare that full identity theft is.
  3. Identity theft rates are down because it’s just too difficult to steal identities and it’s way easier to steal credit cards. Only 0.5% of consumers had their identities stolen last year, down from 1.2% the year before. Experts think it’s because thieves like credit cards better. It’s easier for them.

As with everything in your financial life, it is always better to KNOW. That means your best protection against theft or fraud is simply taking a look at your credit card, debit card, and checking statement each month. Look at your credit report every year. If you are worried, you may decide to put a security freeze on your credit report, which means NOBODY can look at your credit report unless you unfreeze it. Therefore, anyone trying to open an account with your information will be blocked. Review it! It only takes a few minutes.

If you have never been to a Nike Town and you see a charge for $1200 from Nike Town in Manhattan when you live in London, England, chances are someone stole your credit card number. By the way, that is how I found out someone stole my credit card number about 15 years ago. I’ve still never been to a Nike Town…