Last month, I introduced the financial planning component of Cash Flow Planning and Debt Management. This month, I would like to elaborate on that concept and perhaps help you locate advisors in your area who specialize in this service. Let me first summarize why cash flow planning and debt management is important in the financial planning process:
Our firm strongly believes that understanding your cash flow is the foundation of your financial plan. Understanding your cash flow is basically knowing how much money comes in; and how much and where it goes out each month.
Cash Flow is a key factor to all plans, and affects all areas of wealth management.
- We purchase disability and/or critical illness insurance to protect our future cash flow in case of a disability or major illness.
- We purchase life insurance to provide cash flow to our loved ones in the case of our death.
- We invest our money in various financial securities to provide future cash flow at retirement time.
- We save cash flow for future use in case of emergencies that would erode our current wealth.
Without a proper understanding of your cash flow it is difficult to make informed wealth management decisions and very difficult to achieve your financial goals.
Debt Management is related to Cash Flow Management. In addition to understanding your cash flow, you must also understand what debt is; what sources and amount of debt you have; and the effect of your total debt within your overall financial plan. Proper debt management ensures efficient use of cash flow for the repayment of debt resulting from goods and services you previously purchased; ensures you have access to credit if needed; and ensures you make wise borrowing decisions or use debt instruments to your financial advantage. In practicing proper cash flow and debt management, you can avoid disastrous financial consequences, and prevent erosion of your personal wealth accumulated to date.
All you have to do is approach your financial advisor and inquire about creating this sort of plan for you. You may be surprised to learn that your existing advisor is not specifically trained in this area. Up until recently, there were few properly trained advisors in the area of cash flow and debt management, indeed cash flow and debt management training and written courses were virtually non-existent in our industry.
I trained in this area by participating in The Money Finder’s Bootcamp training class presented by Stephanie Holmes-Winton (aka Cash Flow and Debt Guru). In addition, I successfully completed the only written course of its kind in Canada at the time (created by Ms. Holmes-Winton), to allow me to use the statement “Certified in Cash Flow and Debt Management.” Recently, Ms. Homes-Winton launched the only cash flow designation course in Canada: the Certified Cash Flow Specialist (CCS).
I encourage all readers to get involved with cash flow planning, the basics of any financial plan. Speak with your financial advisor. If he or she does not offer this service, contact The Money Finder to find a CCS or another trained specialist in your area.
Here is to achieving all your dreams one step at a time, and it starts with cash flow planning!