Cash Flow and The Book
The Book can be a very effective tool to gather your info, keep track of where you are going and sometimes I like to look back and I can see my wins. I am an athlete so I like to make things seem like a game, I compete with myself to right things in my life that I have lost control of. This article is all about recording cash flow.
The older I get and the more I right behaviors in my life the more I wished I had had someone in my life to teach me these things, growing up we had a lot of love, just not a lot of financial security. I see how my parents struggle now in retirement, I don’t want to have to make the decisions I see them making. So, I am currently teaching my younger brother and anyone else who wants to learn, how to set themselves up to buy their first home.
The info in The Book will help you have a better idea of where you are and help create better habits to grow your future.
You have to see where you are, to understand where you are going
Written vs Digital
There a bunch of different tools out there but keep it simple, find something that feels good, so that you continue to use it. The goal is to find a tool that helps you create a routine, and try to stick to it for 90 days.
Written – A Simple Notebook
There are many studies out there that show writing things down can be more effective for your brain to process information.
Benefits of writing things down
- It helps you to remember more
Before I cleaned up my situation, I could not remember what was paid and what was not. I could not keep anything straight in my head. With my job, I could remember what I had to do, I kept a written planner, and when I applied work habits to my personal life, I remembered that I had accomplished tasks, all because I wrote it down.
- It helps you think “bigger picture”
There are times when I am planning out a month and I calculate out a way to meet a goal, its usually because I am able to calculate cash flow 3 months down the line. I can plan a trip or a larger purchase instead of flying by the set of my pants, or just spending frivolously. I always do better with a plan!
- You will learn more
In 2014, the Association of Psychological Science reported that students who physically wrote notes on paper developed better memory. When you exercise thought to paper your brain will help you find a solution.
- You won’t be distracted, if using a device with social media
There is something about being on any electronic device that sucks you into looking at email, messages or any other social media. As I write this, my email is off but my phone is close. If I write by hand, I am less likely to pick up the phone.
Digital – Using Electronic Tools
There are some great apps out there. They are helpful once you have all of your info together, there are 2 that I have used
Mint
Mint has many great features and you can set it up not only track net worth, but I will prompt you to pay bills, set up budgets and notify you when you are close to exceeding a budget. This app also comes with a credit checker and emails you whether on not there are changes to you credit file.
Personal Capital
Personal Capital is marketed as a financial asset manager, but it is a tool I use everyday.
I can see credit card purchases, my different stock accounts, 401k info, my mortgages, and bank balances. I can see my net worth at any given time.
As you can see, I use 2 different tools, written, the book to keep track of cash flow and expenses, and digital, Personal Capital shows me the result.
What goes into the Book?
This is where the gathering of the mess meet the page
- One the Left side page, list all of you credit cards, lines of credit or personal loans.
- Date Due – Name of Owed – Monthly Payment – Totaled owed
- Total the columns up
- Under this list your rent or mortgage, with date due
- Then, list your expenses with date due
- Utilities
- Cell phone
- Cable
- Home and auto Insurance payments
- Daycare
- Or any other bill you may have
Total up all the lists, and that is what you are needing to cover you monthly bills
On the right hand side of the right page you are going to list cash flow. Cash flow is the money you have coming in. You list your paychecks net pay, side gigs, etc., so that you can see what you have coming in. Total that list up
Is you right side greater than the left?
What about investments?
If you have any, create a section in the lower right hand page and list.
Once you have all of this info…PAY ON TIME. Every time you pay 1 day late on a credit card you are setting yourself up for more charges. Every time you pay 30 days late, it hits your credit file.
Create Your Day or Days
I set aside 2 days a month to place bills into my Book and pay them, it’s usually the days before I get paid by my job. I have been using this system for 8 years. I have perfect credit, I own several properties, I have a high paying job and several stock/401 accounts and this helps me to think about how I am doing and am I moving towards my goals. If I am not moving forward, it lets me see what am I doing that is hurting me and how do I fix it. I open bills when they come in, just in case there is an error, other than that I don’t look or worry about it until I sit down with a cup of coffee, do my ritual and enter the number into my book manually because that is what I like. I pay my bills before they are due, I know how much I can use to purchase a property or add to my stock account. I know how much my account will have at the month and then I start over. I can account for it all, and it feels good.
What are your habits?
Take a deep look. What habits are not serving you? What can you do to create better habits?
If you are here, you know what the problem is. If something extreme happened to you, don’t be afraid to look or ask for help. After therapy, meditation was a life saver for me. You have to find what works for you.
Your System, Your Routine – Filing, Shredding
You may or not be like me, I have about 20 -30 different envelopes I open a week, that are delivered to my door. I do not use electronic/email for bills, I have a tendency to forget about the bill if I don’t have a physical copy to go through my system. And I record my mail only a few times a month into my book.
I receive the bill, remove outer envelope and any other pieces and trash them. When I am ready to log on my book I only have the bill part
Over the years I have tried to be organized enough and place in a filing cabinet, but I just didn’t make time to do it and I would just have batches of paid bills waiting to be filed. I prefer to place my paid bills in a drawer, it’s the bottom drawer of my desk organizer in my office. It used to be a wooden wine box on top of a shelf, but it can change any year as long as it is consistent. The only bills I do not place in the drawer are of importance, such as, insurance papers, personal, car or home, those I do file so that I know where they are at any given time
Just a side note – Email billing/monthly statements
We are working on setting you up to create a conscience routine, in the hopes that all credit will be paid off, but there is a new issue to think about in this age of online.
When closing out a credit account, you believe is paid in full, and have opted for an email for payment, change it to to paper billing immediately, you may miss an email that has a final payment of a few dollars (interest) that you may be unaware of.
Credit companies will quickly report you for a past due payment even though it was for just a few dollars. I have heard from about a dozen people that this has happened to and it will stay on their credit report 7 years.
Ultimately it is best to get into the habit of filing your bills, but only the most important are critical to file.
As you are just starting this process, I would not shred at this point until you have a full grasp of what you need at the end of the year for taxes.
End of Year – What Gets Shredded
I shred department store receipts. Normally I do not recommend these kind of cards but I do have a few that give extra savings if you use the card, but I always pay off in full as soon as I get home, so I only buy what I can afford to pay for that day.
I also shred statements that have carry over payments, meaning nothing has been charged to them. These for me are statements for 0% cards that I have transferred balances, I will discuss later, but my goal is to pay no interest and 0 in transfer fees.
I prefer a larger shredder, one that can handle 5-6 pages easily, and able to shred credit cards. Don’t buy the smaller units that say they can handle this many sheets, pay a little more so that you will not need to replace for a few years.
I have gone through a few of these in the past 10 years. The only that has lasted the past 2 years and is running strong is the Royal 112MX shredder from Amazon.
Clear Your Clutter, Clear Your Mind
As just a piece of advise, you should always know where everything lives. If you have boxes in the garage, in your closet or in storage, GO THROUGH THEM. I fully understand minimal living but I like my stuff, so I have to clean out my space every 3-4 months. I am much clearer and carry less stress when I don’t have to think about cleaning stuff up. So while you have the shredder out, make it count.
Next we discuss your credit report
“Action will delineate and define you” Thomas Jefferson