FPU Lesson 3 – Cash Flow Planning

The third week covers how to create a complete and thorough budget. Below are my notes from the lesson, including the key points that I highlight from the video when leading the class, and some supplemental material that I think could help the class go further on this topic.

Lesson 3, Cash Flow Planning

Key Points

Spend all your money on paper before the month begins. When it comes to cash flow planning, the emphasis is on the plan. Making a plan puts every dollar you earn to work towards some goal. It’s true that reality might interrupt your plan, forcing you to adjust, but having no plan to begin with turns what would have been an interruption into a crisis.

Use the envelope system for successful cash management. Debit and credit cards sell us on the convenience, but what the really do is numb you to the amount of money being spent. To gain control over spending, you need to see and feel the money leaving. Setting aside cash for items on your budget (such as groceries, restaurants, clothing, etc.) can help rein in costs in those categories.

Give your budget 90 days to really start working. It takes time for a new skill to develop into moderate proficiency. Don’t think you’re going to be the exception. Even four years later, my family is still learning ways to improve our monthly money management process.

Challenges

What Are Your Four Walls? Build a strong foundation for your budget by determining which things must be taken care of each month.

Balance Your Checkbook. Don’t fake it when things don’t add up. Making the effort here can really pay off.

What’s Your Car Worth? You’ll need to know to fill out your consumer equity form. The Kelley Blue Book website can tell you. (www.kbb.com)

Go Deeper

Here are some resources for helping you refine your family’s value system when it comes to life and money:

• Purpose Driven Life by Rick Warren

• QBQ! by John Miller

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Next week, Lesson 4 – Dumping Debt.