Cash Flow

At DeGroff Financial we talk a lot about cash flow and the reason why is simple:

Without a solid understanding of a client’s cash flow, we would be building a financial plan on an unstable foundation. We can insure a client, invest money, build the greatest plan in the world—but all that work is pointless if the cash flow doesn’t allow us to implement that plan.

Cash flow is simply the inflow and outflow of your money. Money goes into your accounts, money goes out of your accounts. You spend places, you save in places, you invest and insure yourself. But many do not pay attention to all the places they spend money. Common financial advice will tell you to “skip that $5 coffee every day and you’ll retire rich,” or similar ridiculous anecdotes, but it doesn’t address the real issue, which is simply not having a feel for where your money is going.

At DeGroff Financial, cash flow is king. It’s more important that we learn how you spend your money than it is for us to just give blanket advice about it. When we learn how you spend your money, we can help assist you in the proper financial decisions to move your situation forward. You don’t want to live paycheck to paycheck for the rest of your life, and there are things you want to accomplish other than just working for forty years and then having some semblance of a retirement. You have a life and you should be able to live it now, enjoy it now, while also planning for the future and retirement.

Our job is to help you reach those goals and aspirations. To assist you in making the decisions necessary to become who you want to become. That’s what we do. That’s why we talk about cash flow.

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The Function of Financial Planning

Last week we discussed our new definition of financial planning, which is the allocation of financial resources. Today, we are going to discuss the function of financial planning:

The function of financial planning is simply “to ensure that money exists when needed.”

When you view financial planning through this lens, it completely changes the way that you make decisions regarding your finances, and it should make you re-think the model of planning that has been preached to us for years. 

Much like the old food pyramid that showed us that bread and pasta should be the primary food we consume, our model of financial planning is flawed as well.  We focus on funding retirement, but neglect our short and mid-term finances. We don’t protect our incomes with proper insurance. We work jobs we hate simply to get a paycheck and benefits, and then complain about both the paycheck and the benefits.  I’ve consulted with people that are putting 15% of their paychecks into a 401k, but also overdraft their bank account on a regular basis. 

What sense does any of that make?  This is why we say that financial planning is the allocation of resources, and should not be confused with retirement planning, tax planning, insurance planning, etc.  Unfortunately the industry doesn’t always make that distinction, and that works to society’s detriment.

To put this into perspective, think of the two sides of this coin:

Side 1: Most would argue that the function of financial planning is to make (or grow) more money.   Rate of return, compound interest, asset allocation, diversification, etc. are all things we hear about on a regular basis.  We make decisions based on how to make the most money off of what we currently have so at some point in the future we have more money. 

Side 2: When we know that the function of financial planning is to ensure money exists when needed, it encourages us to make completely different financial decisions.  We save money for every stage of our life, we protect our income , we insure ourselves, we create new opportunities for ourselves and allow for passive income, and perhaps most importantly, we focus on our cash flow.

When we start to make the right decisions with our money, more money follows.  The function of financial planning-everything we do at DeGroff Financial-is to ensure that money exists when needed.  Every situation is completely different and needs to make decisions accordingly.


What is Financial Planning?

October is National Financial Planning Month, so the average consumer can expect to be bombarded with a wide array of information throughout. All of that information can be overwhelming, as well as confusing; we believe that one should understand what financial planning IS before one understands what financial planning DOES.

What exactly is financial planning?

Financial planning is the allocation of resources. That’s it. It’s not retirement planning, insurance and/or investments, tax planning, and certainly not a document that you review with a person in a suit once a year. It is simply the allocation of resources. In other words, it is about knowing how to allocate your resources among the many components of your financial life.

This means that, done properly, every component of your financial plan should be working together as a cohesive unit. The purpose of that unit is to propel you forward toward your goals.

Today’s financial industry essentially teaches us that money is a carrot on a stick. Put your dollars away in retirement accounts and magically at some point in the future we can live happily ever after.

Money should not be a carrot on a stick that we chase our entire lives, but a catalyst that allows us to build the life that we want now. It should help us make decisions that will lead us to live the life that we desire, rather than leading a life that’s waiting around for retirement. Far too many people are living the “waiting on retirement” scenario.

We want to change this. Financial planning can change that, but only if we redefine our definition of it and start to truly understand that our money needs to work for us, rather than us working so one day we will have money.


What If?

Sometimes, things don’t go as we thought they would.  
It’s just a fact of life.
The water heater blows up.  The vacation costs more than expected.  The paycheck wasn’t as big as we thought it would be. Who’s this FICA guy and why is he taking my paycheck? There’s not enough money at the end of the month.

Kids, taxes, school, pets, debt, cars.

At DeGroff Financial, we get it.

What if it wasn’t like this?  What if it was just…different?  What if you weren’t struggling financially, had some money in savings, not finding yourself waiting until payday, and not having to run every decision you make through the lens of your financial situation. 

At DeGroff Financial, we can help you accomplish these goals.  We can walk you through each step of your financial journey, help you make the correct financial decisions, and help you get to where you want to go. 

Because we believe that money should be the wind in your sails, and not the anchor that holds you in place. 

Reach out to us and let’s get you on the right path.


Access to Cash

In meeting with clients on a daily basis, we find that most people are focusing so intently on putting money away into their retirement accounts that they are missing out on opportunities that present themselves earlier in life.  Remember, retirement accounts such as a 401k or IRA can’t be touched without penalty until age 59 ½.

But what if you want to start a business at 35?  Or buy a beach house at 42?  What about the everyday scenarios such as needing a new transmission or having to replace a roof?

At DeGroff Financial, one of the things we stress the most is access to liquid cash throughout each stage of your life.  The entire function of financial planning is to ensure that one has money when they need it. WHEN they need it—not only at some arbitrary date in the future.  Because let’s be honest:  the model of working forty years, getting your gold watch and a pension is dead.

We believe that money should be the tool you use to accomplish whatever you want. To propel you forward into the life you dream about.  Money should not be just a goal that you achieve at some point years from now. 

If this resonates with you, let’s have a conversation.  We can help you allocate your resources properly and get you on a path that makes more sense. 

Are You Really Protected by Your Work Benefits?

After coming out of yet another meeting where this has come up, I’d like to address this on a broader scale:
We find that many people don’t have a solid understanding of the benefits they receive through their jobs.
For example: you might know that a standard employer-based long-term disability plan covers 60% of income, but did you know that disability income can be taxed in some situations? Are you aware of what actually qualifies you to be considered disabled? Or how long your policy will pay out? 
The number one cause of bankruptcy and foreclosure in America stems from medical costs due to unexpected illness or injury. Many, many people think that they have “that covered” when in reality they are far from adequately covered. 
Your biggest asset is your ability to earn income—wouldn’t it make sense to protect it? 
If you’re concerned about whether or not you will be protected if you get injured or sick, or if you’d just like some help making sense of your employer-based benefits, send us an email or give us a call so we can sit down and take a closer look at your situation; you have nothing to lose and everything to protect!