Every Monday, we look at the ABCs of cash flow management.

Read: The ABCs of cash flow planning

F is for frequency

I chose this word for two reasons: it’s important to identify common, or frequent, financial habits that trigger clients’ overspending. Also, you should help people manage their cash flows frequently to ensure they stick to their cash flow plan.

To do this, you need to help people monitor the following items.

Recurring expenses: The frequency of an expense is connected to how much is spent overall on that item or category. For example, people don’t often overspend on monthly, set expenses such as car insurance. But, the costs of weekly trips to grocery stores or of daily stops at favourite coffee shops, for instance, can easily rise because they’re variable expenses.

Consider someone who spends an average of $170 a week on groceries, for a total of $680 over four weeks. If they decided to go shopping 10 times over that same four weeks instead, they’d probably spend more than $68 per trip. They might make impulse buys or use $170 as their reference point and spend more.

Spending frequency: If your client tries to manage his day-to-day spending by giving himself a monthly amount, he might find it more challenging to control overspending than if he used a weekly budget instead.

The proof

Years ago, I conducted a successful spending experiment. I used myself and a group of clients as testers. Here’s what we found.

If we gave clients a target of spending $2,000 per month, that amount only lasted them an average of 2.5 weeks. In fact, they spent so much that they were on track to spend $41,600 per year or $800 per week.

But, when we gave clients a weekly spending target of $500, they didn’t overspend. In fact, their average weekly spend was on track for $24,000 per year or $461.53 per week.

As you can see, when you work with a client’s cash flow, frequency can make or break the plan.

Continue on to letter G by reading: The ABCs of cash flow planning: G is for Gusto

Stephanie Holmes-Winton is a Halifax based financial services educator/speaker who helps advisors find the money to help their clients fund their financial plans. She is the author of Defusing The Debt Bomb & $pent. Stephanie is also the founder and board chair of the Certified Cash Flow Specialist™ designation program. You can reach Stephanie at sholmes@themoneyfinder.ca or themoneyfinder.ca
Originally published on Advisor.ca
See all commentsRecent Comments


Fronteirwm. I am not for a second suggesting that you tell your clients when they can go to starbucks, how much wine they can buy or how much to spend on groceries. But I can tell you that without understanding your clients cash flow it is impossible to give the best advice on retirement, and income protection in particular. The areas you highlight are very product related. I do suspect many of your clients would love it if you could help them have more life from the money they have! How would your average client answer the following two question “If I could drastically increase your net worth through efficient tax planning, would you like me to skip over that process? If I could increase your net worth by a similar amount again through efficient cash flow planning, would you like to skip over that?” if your client doesn’t want to pay extra tax they don’t want to have cash flow leak out in other ways either.
Cash flow planning is not baby sitting or budgeting. Cash Flow Planning is suitable for high income clients and business owners and is by no means a waste of time or effort. As a CFP you should know that our initial cash flow planning training is qualifies for 8 FPSC approved credits. When we spoke to the FPSC they most certainly seemed to think that CFP’s should have cash flow planning skills. Tell me one financial product or concept you deal with that isn’t effected by or for the purposes of cash flow?

Monday, March 3 @ 11:28 am //////


Stephanie, I do not know a single client of mine who would allow me to poke my nose into the details of their spending habits. This is going too far. As CFPs we need to help our clients with the bigger items in life: retirement, income protection, estate planning etc. Telling them they can’t have a Starbucks or a bottle of wine or how often they can go shopping just isn’t in the picture.

Sunday, March 2 @ 9:28 pm //////

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