2017 Cash Flow Checklist: Part I

By: Mike Earl

2017 Cash Flow Checklist Part I: How is your vehicle savings fund?

Today, we kick off a short series to get help you get in gear with 2017 cash flow planning. We are on day 12 of the new year, and The Wealth Group is here to provide real-life, simple cash flow planning tips/ideas for 2017. This series will contain tips that will take you just minutes to implement, but could save you tens of thousands of dollars (and more) over the long haul. As we always say: simple, not easy.

We know that cash flow planning is the foundation of personal finance; it is the cornerstone. What does that mean? It means that prudently managing your income and expenses (with emphasis on the latter) is the key to successful wealth-building and wealth preservation.

My wife and I began saving for a minivan before we had our first child, even though that purchase was at least 3 years into the future. In October 2014, we began setting aside $200 per month for a future minivan purchase.

Behold, the beauty that is the 2005 Honda Odyssey.

From that time forward, my plan has been to accumulate anywhere from $6,000 - $10,000 for the cash purchase of a used minivan. I knew that expense could arise anywhere from 2017 - 2020 (upon the birth of baby #3 or baby #4, depending on whether you are talking to me or my wife), but I wanted to get the cash "on ice" as quickly as possible.

The best way to quickly sock away cash for a future vehicle purchase is to make it automated. I scheduled $100 automatic, electronic transfers into my "Vehicle Savings Account" on the 15th and last day of each month. If the money is swept out of our joint checking account before we get accustomed to seeing it there, the money cannot be spent. Austin calls this type of budgeting "Debt Avoidance Budgeting."

It's also important to note that I view this $200 per month as spending, not saving. Why is that? It's because this is money being set aside for future spending on an "asset" that will eventually be worth zero. The only saving I count in our family cash flow planning is the dollars set aside for long-term growth (i.e. retirement savings).

If you're unsure of your capacity for socking away hundreds of dollars a month for a future vehicle purchase, then just start small. Even at $25 or $50 per month, you are getting the ball rolling. Schedule a calendar reminder for 3 months hence to increase your monthly addition to Vehicle Savings Account. Your future self will thank you.