{"id":30618,"date":"2025-07-29T00:37:10","date_gmt":"2025-07-29T00:37:10","guid":{"rendered":"https:\/\/www.newsbeep.com\/ca\/30618\/"},"modified":"2025-07-29T00:37:10","modified_gmt":"2025-07-29T00:37:10","slug":"how-cash-flow-planning-keeps-clients-out-of-the-red","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/ca\/30618\/","title":{"rendered":"How cash-flow planning keeps clients out of the red"},"content":{"rendered":"

Open this photo in gallery:<\/a><\/p>\n

Cash-flow planning goes beyond budgeting, providing more in-depth answers about how and why people spend.Tatiana_Stulbo\/iStockPhoto \/ Getty Images<\/p>\n

Many advisors and financial planners prepare budget sheets to keep clients on track with their finances, but even these plans can still result in a shortfall sometimes. <\/p>\n

That\u2019s because some clients tend to guesstimate their discretionary spending on the budget sheet, an amount that often turns out to be much lower than the reality. <\/p>\n

\u201cThey may know the amount of their mortgage but not their groceries, because there\u2019s too many transactions,\u201d says Stephanie Holmes-Winton, founder and chief executive officer of CacheFlo Inc. in Dartmouth, N.S. <\/p>\n

She says cash-flow planning goes beyond budgeting, providing more in-depth answers about how and why people spend, and creating an action plan to address those issues.<\/p>\n

\u201cBudgeting tends to be about what you\u2019re going to cut, and it tends to be a lot of categories to manage,\u201d she says. \u201cCash-flow planning is an entirely behavioural-based approach.\u201d<\/p>\n

The bucket list<\/p>\n

Her cash-flow planning approach separates expenses into three distinct buckets. <\/p>\n

\u201cCommitted expenses\u201d include the fixed bills that don\u2019t change in a given month, such as a client\u2019s mortgage or rent, car payments, child care and utilities. <\/p>\n

\u201cThese are non-emotional, most are fixed or predictable expenses,\u201d she explains.<\/p>\n

\u201cSpendables\u201d is the next bucket. Ms. Holmes-Winton advises clients to set up a separate, no-fee account for this purpose. <\/p>\n

The spendable account goes toward a combination of \u201cneed and want\u201d items, she says, from groceries to children\u2019s extracurriculars. The cost is more likely to vary each month, which is why these items are not in the committed category.<\/p>\n

Jacky Ip, founder and financial planner at InGauged Financial in Vancouver, calls these expenses \u201cemotional purchases\u201d \u2013 the things that bring clients the most joy.<\/p>\n

\u201cThat\u2019s the area where clients overspend when they don\u2019t have a system to manage it,\u201d he says. <\/p>\n

Rather than chastising clients about their discretionary purchases, Mr. Ip works with clients to establish an amount they can spend safely each week while still meeting their other financial goals. <\/p>\n

\u201cIt\u2019s a system that will encourage and remind them in the moment not to overspend,\u201d he says. <\/p>\n

Generally, he allocates 20 to 25 per cent of a client\u2019s take-home income toward spendables. A predetermined amount is transferred automatically into this separate account each week. <\/p>\n

He finds clients are more likely to stay on budget if they work within shorter parameters. For this account, Mr. Ip says the rules are simple: if there\u2019s money in the account, they can purchase; if not, no spending.<\/p>\n

\u201cThe goal is not to spend every dollar, every week because there\u2019s always someone\u2019s birthday, anniversary, winter break, spring break, summer break that are just around the corner,\u201d he says. <\/p>\n

One caveat with spendable accounts: Ms. Holmes-Winton advises clients to use a debit card, not a credit card.<\/p>\n

\u201cThey\u2019re also encouraged to set up a separate spendable bank account that doesn\u2019t have overdraft,\u201d she says. <\/p>\n

She knows this limitation can be a sticking point for some clients who value travel perks and cash-back offered with many credit cards. But she points to a Credit Counselling Society study that found the average person with a loyalty points credit card spends 15 per cent more on their purchases. <\/p>\n

As a way to bridge the gap, she advises clients to run their committed purchases through their loyalty points credit card. \u201cThey can also arrange to have their credit card pay itself off automatically,\u201d she says.<\/p>\n

Once spending is targeted in the spendable and committed categories, whatever is left goes in the third bucket, for goals or \u201cmoney found,\u201d Ms. Holmes-Winton says.<\/p>\n

That\u2019s money for short- or long-term goals such as retirement, purchasing a car, or a house down payment. <\/p>\n

Ms. Holmes-Winton has found that using the bucket system creates more funds to put into the goals category, as clients have more of a handle on how they\u2019re spending. <\/p>\n

\u201cAn account structure makes it easier for them to stick to the plan,\u201d she says.<\/p>\n","protected":false},"excerpt":{"rendered":"Open this photo in gallery: Cash-flow planning goes beyond budgeting, providing more in-depth answers about how and why…\n","protected":false},"author":2,"featured_media":30619,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14],"tags":[1397,45,49,48,133,5266,131,132],"class_list":["post-30618","post","type-post","status-publish","format-standard","has-post-thumbnail","category-personal-finance","tag-appwebview","tag-business","tag-ca","tag-canada","tag-finance","tag-globe-advisor","tag-personal-finance","tag-personalfinance"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/30618","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/comments?post=30618"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/30618\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media\/30619"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media?parent=30618"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/categories?post=30618"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/tags?post=30618"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}