In order to ensure success in your cash flow plan I wanted to talk about 4 common traps or mistakes that people fall into which ultimately causes them to "get out of the game" with their finances.
I have been harping on "having a plan" for the past few weeks and those of you that have started making a plan I want to encourage you. Every month you are going to get better at planning. The first month is the hardest, I cannot urge you enough to continue this every month because it is so easy to give up.
Everybody that makes a Cash Flow Plan is not always successful to start. Some do have a natural gift at thinking through each detail and following their plan, but I would say most do not. 4 Common reasons why your Cash Flow Plan may not work:
1) Leaving Things Out
Each month is different. December is going to be much different than June. December has Christmas; June probably has a vacation. March might have a birthday; August your kids need new clothes for school. My point is actually think through your month. Plan it carefully. You have a specific number of money coming in, you have to tell it what to do. That includes mid and long term savings that you set aside each month such as: car, retirement, kids college, etc.
2) Over Complicating Your Plan
You do not NEED to put down $17.22 for toilet paper in a certain month. This is not only tedious and annoying, it is also unnecessary. As an example of what I do is actually lump in my toiletries and groceries together (I usually get them from the same store anyway).
3) Not Actually Doing It
Tell your money where to go instead of wondering where it went. Imagine if a coach did not have a plan for his team; there is a pretty good chance he would not be very successful (and probably fired).
4) Not Actually Living By It.
If that same coach made a plan, but then didn't care if his players actually did what he planned out, they would still not be very successful in this scenario either.
Cash Flow Planning helps avoid living on a crisis by crisis management system. It should not be a surprise when Christmas presents come up or when you need to buy clothes for the kids. These are not what I consider "emergencies." If you want to review my thoughts on emergencies (see Click Here and read the importance of an emergency fund.
Proverbs 21:5 - "The plans of the diligent lead to profit as surely as haste leads to poverty."
