Over time, you can forget why you’ve bought certain products, such as insurance policies you have to pay for each month. That usually means you’ve lost sight of the trajectory of your financial plan.
Having a cash flow plan prevents this, because it makes it easier for you to focus on your finances and goals regularly, as well as build wealth.
Also, as you reach your short-term cash flow goals, you’ll have a greater sense of success and will be reminded of the trajectory of your financial plan.
When taking part in cash flow planning, you know you’re on the right track because you can:
1. Review results more often. You likely review your portfolio quarterly or annually, but you can go over cash flow results more often, especially since you’ll generally start seeing the effects of cash flow planning within 60 days.
2. Celebrate short-term progress. If you do this, you’ll be more likely to moderate your behaviours. It’s common for people to feel the early effects of cash flow planning within 10 to 14 days (due to spending and debt repayment changes), so make sure you focus on your accomplishments rather than on the challenge of altering behaviours.
Making long-term goals is important, and they can be reached, but it’s rare to see or feel results quickly. If you can see more immediate results with cash flow planning, you’ll be more likely to stay on track with your financial plan.
Stephanie Holmes-Winton is a Halifax-based financial services educator and speaker.