I’ve talked about how to construct a hub account for optimized cash flow in previous blog posts. But today I want to dive deep into not only how to get a cash flow system up and running in your life, but also the many ways it can positively impact you and your finances (both in the short and long-term).
I’ve talked about how to construct a hub account for optimized cash flow in previous blog posts. But today I want to dive deep into not only how to get a cash flow system up and running in your life, but also the many ways it can positively impact you and your finances (both in the short and long term).
Mentality Around Money
Most of us have been taught to think about money in similar ways. This is why, in most cases, people treat their paychecks with the “left over” mentality. This means that your paycheck is deposited into your checking account. From there, you pay bills, living expenses, maybe grab Chinese food on the way home from work for the family – and then what? You’ll use what’s “leftover” to reach any additional financial goals.
These “leftover” goals might actually be BHGs (Big Hairy Goals). You might be intending to use leftover money to pay down debt, build an emergency fund, or save for a goal – like buying a house, a car, or treating your kids to a trip to Disney World.
When we think about our finances, these goals are anything but “left over.” In fact, they’re probably the most pressing thing on our minds when we organize our finances. We budget for them, we say we’re going to achieve them – but it rarely happens.
Do you make a turkey every Thanksgiving? Every Thanksgiving, my family and I roast (or, sometimes, if I get my way – we deep fry it) a turkey. After everyone eats, we’re left with a bunch of leftovers. There’s no way we could have possibly finished the whole turkey – there’s only so many of us!
We always have the best intentions to use the leftover turkey for other recipes. Sometimes, it happens. We make turkey sandwiches, turkey pot pie, use the bones to make broth…but other times we get busy. Or we just get sick of eating turkey. So what do we do? We pitch it.
We might feel a little bad, but ultimately the turkey was left over from the main event. So, we don’t feel that bad. And the worst part? We’ll probably do it next year, too. That’s because leftovers are, inherently, less important to us. If we bought a Turkey for Thanksgiving and threw the whole thing out before dinner – that would be a problem. But the leftovers? They’re not as high on our priority list.
The same is true when you view your “leftover” money as being set aside for big-picture financial goals. It’s leftover, so it’s not as important as the daily living expenses you’ve already spent money on.
You might use it for it’s intended purpose (retirement, savings, debt repayment), or you might use it for another movie night with the kids that you hadn’t planned on. Or you might buy a few extra things at the store that weren’t on the list. The point is – the leftover money gets thrown away on stuff that isn’t as important as your original goals.
How can optimizing cash flow help?
I like to help clients build a cash flow machine. This “machine” takes your income and, rather than sticking it into a checking account that everything comes out of, it goes into a “hub” account.
The hub account acts as a stopping point for all of your money. Out of that account, you’ll pay down your debt, prioritize building an emergency fund, and save toward big goals – like a vacation. You’ll also recreate a paycheck for yourself that is deposited into your normal checking account. From here, you’ll pay your living expenses, and have all the leftovers as “fun money” – which is what should be coming out of the leftover money pile.
By optimizing your cash flow with a hub account, you’re taking your big goals (debt repayment, savings, etc.) and prioritizing them. But you’ll also be optimizing your daily spending – because you won’t have the same “leftover” money to spend with. That money has already been given a purpose through your hub account.
The hub account helps you stick to a budget, and constantly prioritize where your hard-earned cash is going. Sounds amazing, right?
Ready to meet your goals?
If optimizing your cash flow with a hub account sounds too good to be true – it isn’t. It is, however, something that requires dedication on your part. You need to be willing to make optimizing your cash flow and spending your “leftover” money intentionally a priority. But the payoff for sticking with it is huge.
You’ll hit your goals faster. You’ll get out of debt sooner. You won’t stress about unexpected expenses with a savings account that’s been padded through the hub account. And the best part? You’ll truly enjoy the stuff you do spend money on, because you’ve put thought into it, and because you’re spending without the guilt of “but this money was suppose to go toward insert Big Hairy Goal here.”
I love hearing that our clients are ready to start optimizing their cash flow. If you want more information on setting up a hub account, or you just want help getting it done – contact us today.