The ABCs of cash flow planning: L is for Linear

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

L is for Linear

It’s frustrating for you and your clients when well-intentioned debt repayment plans don’t result in perfectly linear repayment patterns.

When you refer a client to a lending professional who helps her reorganize her debt and free up cash flow, you expect her financial situation to improve throughout the following year.

Read: Clients focus on reducing debt, saving for retirement

It’s not uncommon, however, to discover that a client simply hasn’t made as much progress as anticipated.

To head off problems, use the following tips:

Set clients up for success. Before you even start dealing with a client’s debt, tell her that the results won’t be linear and that you don’t expect her to perfectly follow your plan. No matter how well she follows prescribed steps, she’ll likely have to deal with unexpected expenses along the way. Nonetheless, help her stay positive about her progress by always comparing where she was versus where she is now, rather than looking at how far she is from achieving her final goal.

Get all details. When you sit down to review debt repayment results, first ask your client whether she’s had to cover any major or additional expenses recently, and whether she’s had to deal with a change in income. She may owe $10,000 more than you predicted at the end of the year, for example, but may also have had to deal with a $12,000 emergency. In reality, that means she’s $2,000 ahead of your initial projection. Read: Most rainy day funds don’t cover emergencies

Tweak plans if needed. If your client isn’t on track to reach her goals but hasn’t dealt with any unexpected expenses, she’s likely increased her spending. In that case, don’t be afraid to make adjustments and start again. Practice makes progress. Read: Most clients spend needlessly

And remember: though failure can be frustrating, cash flow management isn’t easy. If it were, clients wouldn’t need your help and advice.

Continue on to letter M.

Also read:

Get young people to talk about money

3 tips to help clients manage money

The ABCs of cash flow management: I is for Interest