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A simple 5-step framework for cash flow

Hoping for the Best is a Bad Plan

People are often looking for a silver bullet or a little-known magic strategy to succeed with their finances. I’m here to tell you that your focus should be on your business and enjoying time with loved ones. This doesn’t mean that we should just hope for the best. Financial inefficiency can drain resources more than you might realize. A great deal of success comes from mastering the fundamentals rather than relying on complicated strategies. Here’s a framework to optimize your cash flow and free yourself up to focus on your business and be present for your family. FYI: Steps 2 and 3 are where many people have a lot of trouble.


graphic reads: Starter emergency fund. Not the starter emergency fund you need. . . just kidding, it probably is

Step 1: Starter Emergency Fund

Something on the Sidelines

When we are first getting started, it’s crucial to have some cash on the sidelines. Don’t worry, I am not suggesting having a fully funded emergency fund yet—that is step three. This is your starter emergency fund, your first financial safety net, ensuring that unexpected expenses don’t derail your long-term goals. Unforeseen expenses are inevitable, so our first step is to prepare for them. Having funds set aside prevents you from dipping into your savings, retirement accounts, or, worse, racking up credit card debt. Some examples of common emergencies might include:

  • An unexpected car repair

  • Water heater or other appliance needs to be replaced

  • Medical deductible

  • Car insurance deductible

  • Roof or other structural repair


Graphic reads: Attack bad debt. "There are three kinds of people:  the haves, the have-nots, and the  have-not-paid-for-what-they-haves."  - Earl Wilson

Step 2: Get Rid of Credit Card Debt and Other High-Interest Debt

The Real Cost of Credit Cards

Credit cards are not your friend. This is why this step is so important. If you're wondering how to get out of credit card debt, we need to stop accruing new debt and focus on repayment strategies. This means we shouldn’t be working on the rest of the steps if our current goal really is to stop paying credit card debt and stop worrying about it.

I get it. Using credit cards to pay bills may have started as a last resort, then one day using the credit cards for daily spending became a normal practice. I need to tell you something: if you’re paying a dollar in interest, screw the points. While earning points might seem like a perk, in reality, it is a trap. We haven’t even touched on the credit impact of credit cards. Consider this:

  • $250 invested monthly for 20 years at 6% = $221,000

  • $250 in debt monthly for 20 years at 30% = $1,800,000

  • hypothetical investment, debt assumes no payments, educational purposes only


Two Popular Strategies for Paying Off Credit Card Debt

  • Avalanche Method: Start by listing all your credit card debts along with their interest rates. Focus on paying off the debt with the highest interest rate first while making minimum payments on the others. This method minimizes the amount of interest you pay over time.

  • Snowball Method: Start by listing all of your credit card debts from the lowest amount to the highest amount. Focus on paying the lowest balance first, ignoring the interest rates. This method gives you quick wins and can really motivate you to stick with it. Whichever method you choose, consistency is key.

Graphic reads: Fully funded emergency fund - An emergency fund turns a crisis into an inconvenience. Once I got an Emergency Fund, I quit having emergencies. -Dave Ramsey

Step 3: Fully Funded Emergency Fund (or Significantly on Your Way)

Achieving a fully funded emergency fund is a significant milestone. Here are three key considerations:

  • How To Calculate Your Emergency Fund?

  • How Much Should You Have in an Emergency Fund?

  • Where Should You Keep It?


How to Calculate Your Emergency Fund

Understanding how to calculate your emergency fund is important for this step. Generally, you want to base your emergency fund on non-discretionary income. Non-discretionary income includes bills that absolutely have to be paid, such as:

  • Rent/mortgage

  • Utilities

  • Transportation

  • Insurance

  • Minimum grocery budget


How Much Should You Have in an Emergency Fund?

The standard advice is to save 6-12 months' worth of expenses. If your family depends on your income, your income varies, or your profession is economically vulnerable, consider saving on the higher end of this range. The question of how much should you have in an emergency fund varies from person to person. For instance, a single-income household might need a larger emergency fund compared to a dual-income. If you are single and don’t have any dependents, you may be on the lower end of this range.


Where to Keep Your Emergency Fund

Your emergency fund is there to reduce risk and protect you, not earn a return. This means that your emergency fund should NOT be invested in the stock market. It SHOULD be highly liquid. That being said, your fully funded emergency fund is likely going to be substantial enough to where it’s in your best interest (interest, get it?) to have it in something like a high-yield savings account, which can be a great option. At the time of writing, my clients are getting 5.1% in their emergency funds, but there are lots of options out there. Be mindful of fees and introductory rates.

The size of your emergency fund and your interest rate matter.

  • $5,000 at 0.45% a year = $22.50 in interest a year

  • $5,000 at 5.00% a year = $250.00 in interest a year

  • $50,000 at 0.45% a year = $225.00 in interest a year

  • $50,000 at 5.00% a year = $2,500.00 in interest a year


Graphic reads: Make work optional. "If you are not financially independent by the time you are forty or fifty, it doesn't mean that you are living in the wrong country or at the wrong time. It simply means that you have the wrong plan." -Jim Rohn

Step 4: Save Towards Making Work Optional (or Retirement)

Congratulations on getting to this stage of the order of operations (without skipping steps!). There are a lot of options when it comes to retirement savings, a jar in a safe or under a mattress is not a great option. We prefer tax-advantaged accounts and using pre-tax and after-tax accounts to manage tax rates, not just reduce taxes. You’ll thank me later. Individual retirement accounts, employer plans (401k, 403b, etc.) are great tools for this—if appropriate, a health savings account can also be a great option. Whatever vehicle you’re using, be aware of the total cost and any restrictions, and your savings rate is one of your biggest tools here.


graphic reads: Everything else - Balancing all of your goals can be complicated - but you have laid the foundation

Step 5: Save for Other Goals and live life to the fullest

After ensuring your retirement savings are on track, you can turn your attention to other financial goals. Whether it’s funding your children’s education, purchasing real estate, or planning for travel, this is the time to strategize. For example, understanding how to save for kids' college or how to save a down payment can help you plan effectively.

Other goals might include:

  • Sending kids to college

  • Saving for a vacation

  • Saving for a down payment

  • Saving money for a wedding

  • A golfing world tour

  • Buying an awesome pontoon boat

  • Literally anything else


Balancing and prioritizing all of these goals can be a challenge, but you have set the groundwork for success by following this framework. Some things to keep in mind when you start thinking about all of these goals include:

  • Time horizon

  • Risk tolerance

  • Rate of return vs. inflation


Bringing it All Together

Everyone’s situation is going to be different, and there are always going to be nuances. If you’re reading this, I hope you are motivated to simplify finances and follow the order of operations. It doesn’t make a lot of sense to be working on steps 3-5 if we haven’t completed step 2. It is really important to know, just because a framework like this is only 5 steps and sounds simple when you read it, it can be incredibly difficult to change our thinking. Be great at what you are great at, and remember that simple can be beautiful. Here are the 5 steps to the framework in one place:

  1. Have a starter emergency fund

  2. Aggressively pay off bad debt

  3. Fully funded emergency fund

  4. Get on track for making work optional

  5. Save towards everything else and enjoy yourself


Want to know something great? You don’t have to do it alone! We operate with frameworks like this with clients to help you focus on what really matters—growing your business and being present for your loved ones. There are three steps if you want to consider working with us.


Schedule a FOCUS meeting, take your financial vitals, and accomplish one "next best thing" at a time.


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