Cash Flow Killer #3 – The Silent Killer
How not to use a GPS device
Within the last year, I had an idea to turn-off the voice notifications on my GPS before venturing out to visit a new client. Since I knew 90% of the route, my plan was to just look at the GPS when I got within a couple miles of my destination. This way, I could enjoy the ride and get a head start on my new audiobook.
I made it to that client’s house without a problem, but in the following weeks, I started to notice that I was repeatedly arriving late to my destinations. With the notifications turned off, distractions got the best of me and I was missing turns! My GPS was constantly rerouting me and taking me a less efficient way. I was forgetting to look at the GPS that used to talk to me!
After multiple reroutes and late arrivals to client meetings, coffees, and soccer games, I wisely turned on voice notifications so I could be alerted BEFORE venturing off-course. Having a silent GPS was costing me both time and money. What good was a GPS that didn’t alert me when I was off route?
What does a GPS (Global Positioning System) device and a Cash Flow Management System (CFMS) have in common?
GPS is a navigation system that allows land, sea, and airborne users to determine their exact location, velocity, and time 24 hours a day, in all weather conditions, anywhere in the world.
A GPS device helps you navigate to your destination efficiently, and it helps you get back on-track if you run into a detour or take a wrong turn. It can also save you time since you don’t need to stop and ask for directions (or just wing it!).
An effective Cash Flow Management System (CFMS) should be similar to a GPS. It should help you…
1) feel confident when you are on-track to achieve your cash flow goals.
Knowing if you are on track can improve peace of mind and help you experience guilt-free spending, giving, and living.
2) stay accountable to the goals you have for your life and your cash flow.
Your system should notify you when you are about to venture off-course so that you can make a proactive decision about hitting the brakes before it is too late.
3) quickly navigate through unexpected changes (detours) and decisions that impact your cash flow (should I buy this ______? Can I afford to… _________? etc.).
Without a good system, managing cash flow can feel much more complex than finding your way to a new soccer field, because your cash flow has more than one destination (Ex: Savings goals, fixed bills, and variable expenses vary by week, month and throughout the year.) Imagine how difficult it would be if you were driving to a soccer field and the soccer field moved when you were halfway there!
One challenge that historically plagued my cash flow plan was that my cash flow needed to be changed throughout the year, but my plan didn’t change. If you are like me, your cash flow needs and goals will continue to change over time. Some of the most common reasons your cash flow goals and needs will evolve include:
1) a change in your values or goals
2) inflation (things costing more over time)
3) planned or unplanned life transition (empty nest, new baby, new grandchild, starting a business, job change, tax law change or change in employer benefits)
Cash Flow Killer #3 – The Silent Killer “Turning Off Notifications”
In Cash Flow Killers (part 2), I explored how having a map (plan) without a GPS (Cash Management System) can be a cash flow killer.
If your Cash Management System (GPS), doesn’t tell you where you are and alert you when you’re off course, it likely won’t be helpful in getting you where you want to be. It’s a Silent Killer!
When I first started being intentional with my finances, my problem wasn’t finding a cash flow management system. My problem was that all of the systems I tried were functioning in the same way my GPS functioned when I silenced the notifications. None of the cash flow systems I implemented were set up to alert me, or my wife, when I was off track. (and I use the word “I” in that sentence very intentionally—despite what my professional title might lead y
ou to believe, I am the “spender” and the impulsive one in our relationship!)
The cash flow systems we tried also did not provide us with reassurance when we were on track. That led to unnecessary stress about minor spending decisions, like should we or shouldn’t we surprise our kids with a visit to downtown White Bear Lake for ice cream at Cup ‘N Cone? Should we or shouldn’t we spring for a date night on a riverside patio in Stillwater and pay for a babysitter? Should we or shouldn’t we rent that DVD from Redbox on our way home from a long soccer tournament in Blaine? (because we all know it’s not getting returned after one night and we’ll definitely pay more than it’s worth).
For most of my adult life, I fell victim to The Silent Killer because I didn’t have a cash flow management system (GPS) that would alert me before I was about to go off-course. This cash flow killer could have cost me and my family over $1,000,000.
Below are two examples where I could have used a good Cash Flow Management System to protect me from impulses that sabotaged my cash flow:
Shopping Cart Kryptonite – I have a love for the outdoors, especially when it involves fishing or hunting. This love has contributed to many impulsive cash flow “mismanagement” decisions every time I stepped foot into Cabela’s in Woodbury or my favorite bait shop in Minnetonka. Even as a financial planner armed with a budget and a spreadsheet, I would often walk out spending anywhere from $100-$400 more than I planned to spend! These impulses would sabotage my budget at predictable times of the year- in the days before the fishing opener, the weeks leading up to my annual Boundary Waters trip, and again before the start of the deer hunting season. Looking back, I budgeted about $500 for my outdoor hobbies per year but often exceed my budget by $800 – $1,000…!
Impulsivity would get the best of me I’d end up with items in my shopping cart that were not on my list. To be truthful, I still have this problem but it’s better than it used to be because of the cash flow system I have in place. Without a system to alert me that I was off-track, there was nothing stopping me from going over budget. Even when I knew I was overspending, I’d push worry aside and listen to a little voice in my head reassuring me, “Don’t worry, at least you’ll get some more credit card points!”
Buyer’s Remorse – Rewind to July of 2000. I was a young college student running a painting company while attending school. I happened to spot a beautiful yellow 198_ Corvette on the side of the road, with a price tag of $13,885. Thanks to my painting business, I also happened to have enough cash in my bank account to pay for the car, so I bought it. Within weeks, faced with payroll obligations and tuition bills, I completely regretted the decision and sold it for about $2,000 less than I what I had paid just weeks earlier. The only good thing about this experience was that I realized I was terrible at managing money and I needed to hire a financial advisor or do the work to become one! But if I’d had a cash flow system that warned me when I was headed off track (“mayday, mayday, mayday!”) I might have avoided that big purchase and the buyer’s remorse that came with it.
A million dollar mistake?
I often wonder how much the Silent Killer could have cost me if I didn’t find a better way to manage my cash flow.
Let’s assume I started overspending by $3,000 per year, above and beyond my budget, for 40 years. If I would have invested that same $3,000, at a 10% hypothetical return, that money would have grown to over *$1.46 million!
Thankfully I found a system to help me stay on track towards my goals, and I’m no longer as susceptible as I once was to shopping kart kryptonite and buyer’s remorse.
Why do I share these stories with you?
I care about helping people make good decisions, and I believe that people make good decisions when they have good information.
I don’t want YOU to fall victim to Cash Flow Killer #3, and my hope is to motivate you to find a good cash flow management system that will work for YOU.
You are not alone if you’ve made some bad cash flow decisions. But all is not lost! I want to give you hope and provide practical steps for you to improve the alignment between your cash flow and the life you want and deserve.
What steps can you take to get more out of your cash flow?
You can protect yourself from Cash Flow Killer #3, the Silent Killer, by taking the following steps:
1) Create a relevant and realistic financial plan (map) for your cash flow.
2) Find a system that can alert you when you are off-track and help you stay accountable to your goals. The system should also enable you to enjoy guilt-free spending when you’re on track!
3) Find a system that enables you to quickly update your plan when expenses change or “try-on” ideas that are competing for your cash flow.
For help developing a plan for your cash flow, or to learn more about the Cash Flow Management System we use at One Life, we would love to connect with you for a conversation.
Coming Soon – ACCOUNTing!!
Soon I will introduce you to a Cash Flow Management System that works for me called ACCOUNTing. This system can alert me when I am off-track or about to make a wrong turn with my cash flow. It can tell me when there’s enough “gas in the tank” or money in my account to take my family of six out to dinner, and when I might want to move something from my Amazon shopping “Buy it Now” cart over to my “Save for Later” list before checking out.
The system works 24 hours per day, and I can track my progress and update my plan in just minutes per week.
My favorite part of the system is that my wife and I don’t have to spend hours per month painstakingly reviewing and categorizing all of our transactions in a mobile application.
This new system hasn’t protected me 100% of the time from shopping cart kryptonite, because I still occasionally throw things into my cart like a new fishing lure or a pack of arrows that were not on my list. However, ACCOUNTing has saved my butt (and my wallet) time and time again and has prevented me from going too far off the map with my cash flow.
So stay tuned for more to come on ACCOUNTing, and check out our One Life website if you would like to learn more about our mission, process, and how we can help you uncover ideas to get more life out of your time and your money.
*Investments can lose value. Past performance is not indicative of future results.
All written content is for information purposes only. Opinions expressed herein are solely those of One Life Financial Group Inc. and our editorial staff. Material presented is believed to be from reliable sources; however, we make no representations as to its accuracy or completeness. All information and ideas should be discussed in detail with your individual advisor prior to implementation. Advisory services are offered by One Life Financial Group Inc. a Registered Investment Advisor in the State of Minnesota. One Life Financial Group Inc. is not affiliated with or endorsed by the Social Security Administration or any government agency, and are not engaged in the practice of law.