Episode 11: Gaining Control of Your Cash Flow

Episode 11: Gaining Control of Your Cash Flow

Gaining Control of Your Cash Flow

A Key 21st Century Survival Skill - Cash Flow Management

If you are like most people, you failed when you tried to track your expenses to gain control of your cash flow. Not surprising - it’s a pain to do and it really just tells you where your money went. What you need is a system that helps you plan where you are going to spend the money you have right now. My guest, Doug Peterson, will tell about just such a system and give you some great ideas to help you get started.

TRANSCRIPT:

Thom: [00:00:19] Hi, I'm Thom Allison, your host for the Financial Wheel Podcast, welcome to today's episode. Got a question for you to get us started. Do you know where your money's going right now? It might sound like a weird question, but a lot of people really don't, or at least they don't have complete control of it. And having control of your cash flow is really the centerpiece to getting control of all of your finances overall. So with that in mind, my guest today is Doug Peterson. Doug is devoting his entire career right now to helping people really get control of their cash flow, probably a bit more than that. And he's got a great story of how he got into this and what he's really doing. So I'm going to turn it over to Doug. So, Doug, welcome to the Financial Wheel Podcast.

Doug: [00:01:06] Thanks, Thom. I appreciate being here.

Thom: [00:01:08] Right. So tell us, how did you get involved with helping people manage their cash flow?

Doug: [00:01:14] So to give you a little background of how I got here, I've been an entrepreneur all my life. I've owned seven businesses.

Thom: [00:01:22] Serial entrepreneur.

Doug: [00:01:23] Serial entrepreneur. Or seriously crazy, depending on how you look at it. There's a lot of ups and downs in that the last 18 years I've been an executive coach and mentor and I've probably helped 20 clients over that time that I've seen their personal finances getting in the way of their business. At this stage of my life, I decided that I wanted to do something that would impact people more than just their jobs and really impact them personally. And I thought, what's a huge problem? And going beyond just cash flow management. One of the biggest causes of divorce is finances and money. Stress is huge. And I found with former clients that if I could help them really get on top of their finances, everything got easier. That's why I got into it. I wanted to solve a really big problem and make a bigger difference.

Thom: [00:02:15] Great. Well, that's a it's a big goal and it's one that, you know, I actually kind of share with you because you had Allison Spielman Advisors we tried to do that exact same thing. And when we do that, you know, we're taking a look at a broad range of things that that impact. So we're taking a look at the risks that people have to their finances. We're looking at their savings plans, their tax management, their generosity, planning, estate planning. Do you get involved in doing all of that or can you give us a little better idea of just what the focus of your business is?

Doug: [00:02:45] I don't get involved in doing all that. So let me tell you a really simply what I don't do is I don't do financial planning, which a lot of those pieces you talked about are involved in. I don't manage portfolios. I don't sell products. What I do is help people with where their money's going. How to decide on purpose before you spend it, where you want to spend it. That's in alignment with your priorities. So your money is doing what you want it to do. It creates complete transparency in relationships because you know exactly where you are. In fact, conversations of you're spending too much change. Do what bucket the that come out of it and the emotional loading is gone.

Thom: [00:03:29] Ok. OK. So it sounds like what you're talking about is budgeting, and my experience is that even though there are six letters in the word budget, it's a four letter word to most people and they're going to turn tail and run from that as fast as they can. So how do you get people even interested, let alone excited about budgeting?

Doug: [00:03:53] Yeah, it sounds like a financial diet, doesn't it? Yeah, and you can now have carrots and celery sticks and be happy for the rest of your life. So none of us like that. We don't want a feeling of lack. What we want to do is have a spending plan just decide on purpose where you want your money to go instead of wondering where it went.

Thom: [00:04:13] Spending plan. So that sounds interesting, but it still sounds a bit like a euphemism for budget.

Doug: [00:04:19] It is OK. But the idea is we everything's like like diet, budgeting is emotionally loaded. It sounds like we're restricted and we're not. If we decide where we're going to spend our money, let's say we put it in a bucket called VACATION and we have another bucket that's called HOME IMPROVEMENT. But we say we really want a deck. We can just borrow from that other bucket. It's your money. You can do anything you want with it. But without being intentional, it's common to not fill a bucket. You know, you want to fill just because you haven't paid attention. OK. Does that make sense?

Thom: [00:04:56] Sort of makes sense, but I'm not understanding what you mean by buckets.

Doug: [00:05:01] Well, I'm jumping ahead a little bit because we have a regular immediate obligations. We've all heard about fixed expenses and variable expenses and immediate obligations that we have to have.

Thom: [00:05:12] Sounds like accounting terms.

Doug: [00:05:14] It does. But we all have them. So we pay our mortgages. We pay our electricity bills, and then we have infrequent expenses. We need to budget for those. We need to plan that. We're gonna need some car repairs, things like that. Then we get into quality of life. And now it's funding the things that you say are the most important to you. And it can be retirement. It can be vacations. It can be kids college. But those are the buckets I'm talking about. How do you allocate money to that every month? Easily.

Thom: [00:05:43] Ok. How do you do that? What what are what are the mechanics of this whole thing?

Doug: [00:05:48] So there's a school of thought of every dollar gets a job. And Dave Ramsey talks about it. YNAB talks about it, which is a program that's You Need A Budget that I know you recommend to your clients and I recommend as well. The idea is every dollar gets a job. We don't just spend our money and hope there's some left and use that for what we want. We decide where every dollar is going to. So every dollar gets a job. It's either in your retirement, your emergency fund, some category umbrella insurance. In fact, it's like time management. If you write down everything you have to do during the day, you realize you don't have a lot of time left. And the same thing's true with money. But you also realize that there's a lot of stuff you're doing that's wasting time. And the national statistic I hear is about 17 percent waste. If you decide where your money is going before you spend it, you'll spend 17 percent less than if you just look back at the week your vote and decide look at how much you've just spent. Dave Ramsey talks about 10 to 20 percent savings now. I'm not suggesting you're going to have 17 percent of your money sitting there in a pile. If you do this. But most of my clients can save about 5 percent of waste and not even feel it in their lifestyle.

Thom: [00:07:02] Mm hmm. Wow. It sounds too good to be true. That sort of sounds like we're gonna be eating chocolate cake and losing weight.

Doug: [00:07:09] Well, that's the Keto diet. No, that's got sugar. Never mind. It's not. It's just amazing when we pay attention to things. I don't know if you're familiar with profit first. He used an amazing example with NASA. And NASA spent 100 hundred million dollars creating the ability to take carbon dioxide and get rid it back to oxygen and oxygen scrubbers so they could breathe in space. Well, in Apollo 13, it went out and they said we don't have another hundred million dollars to invest in this. In fact, you've got 18 hours of air left and it's 28 hours to get home or 38 hours, whatever it was. We need to figure out what we've got here. Here's all the parts that you have. And you need to now create an air scrubber that you can get the astronauts home safely with what's onboard, including the broken one. And they did it, but they didn't have a budget to do it. There was lack. So when we find ourselves having less resources and I think we'll find this true in our lives, we're much more creative than when we have lots. When you've got a lot of money to spend on vacation, you buy a lot of stuff when you're tight and you really want to go to Italy. You do what you can to go as far and and go to as many places you can within a limited amount. So just knowing that you've already got all your top priorities covered and what's left and where you want to put it creates a sense of lack, which is not negative. It just helps you really prioritize what's most important. And it's kind of interesting. The word priority comes back from the 1400's. It used to be singular. Now nobody uses this plural and my company name still is priorities. But really, what is your single priority? Are you even hitting that?

Thom: [00:08:52] Great idea. Yeah, it's just. Yeah. Is it making sense? You know, do you know where your money's going? I think actually this is probably a good place to take a quick break. And then when we come back, let's dive into a bit more of the specifics and what are the tools that are available to be used. We'll take a quick break right now.

Thom: [00:09:49] Welcome back to the Financial Wheel Podcast. My guest again today is Doug Peterson, who really is dedicated to making a difference in people's lives by helping them get control of their cash flow. So welcome back, Doug.

Doug: [00:10:02] Good to be back.

Thom: [00:10:03] Wanted to maybe get into some more specifics. We've talked about generalities in a way. We've talked about why it's helpful and beneficial to really get control of your cash flow. How do you do it?

Doug: [00:10:14] Well, tactically, the idea is to get clear on all the money you have. Look at every bank account, savings account, checking account, all your loans, auto loans, any kind of credit card debt and get all that entered into a program. Again, we talked about YNAB as a program and there's several out there. I find it's one of the best. So that now we can look at what we have coming in. We have all the money we have. And then we also can start looking at where we're going to allocate that and build spending plan.

Thom: [00:10:46] Ok, so I'm just sorta going jump in here real quick, because you said you were going to take a look at the places you have money, credit cards and bank accounts and all that. Is it helpful for people to kind of narrow that down and maybe consolidated? I mean, you know, we've run into people who will have a checking account over at this bank and a different checking account there and a savings account here. And then they have three or four credit cards that they use for different purposes and so forth. Does that make things too complicated or does it really not make a whole lot of difference? Just go with what you got.

Doug: [00:11:21] Well, depends on the complexity. I have worked with people that have been to a seminar and the seminars said have 10 accounts, one for your dream fund, one for your vacation fund, one for your college fund, and they're taking the time and funding each account. So in that kind of case, no, that's not necessary. To me, there's two pieces to this. One is we want to be 100 percent on top of our finances every day, know where we stand, but we want it in a very time efficient way. So simplification makes it much more time efficient. If you have accounts that you want that have money in them that you don't use often, they're fine to sit there. It doesn't matter. Other accounts you may have four accounts that all get 5 percent on the first five hundred dollars. Leave those there. They're making more money than you can. A lot of other places. So again, it just depends. But the idea is, how do we. And my focus is how do we get you complete control and a half an hour a week, including paying all your bills. If you have a lot of accounts and your movies stuff all over the place, it's going to take longer.

Thom: [00:12:28] Let's go back to YNAB. You need a budget because we recommend that in our firm you recommend that that's your tool of choice. So to begin with, why is that your tool of choice?

Doug: [00:12:39] I'll use an example my brother gave me when he went to work with a small software company that I won't name because it naming Microsoft would not be a never mind. Anyway, he had a back and is a long time ago. He had a Palm Pilot and he had a digital camera and he said, now I've got a phone that does everything poorly because now it had a it was early days. It had a phone, it at a camera and all these things. So I what I want is a program that not isn't going to track all your finances. It can track your investments. But what's the point? If I'm working with you, I just go on to my platform and I can see everything and lots of graph. So we don't need to track everything. I wanted a program that was focused just on personal financial management. On a day to day basis. So that's why I picked it. And there's no ads. The company has a great sense of humor. The support is excellent. I mean, they're really an excellent company.

Thom: [00:13:34] No, I have found the same thing. And so, you know, the idea is let's just pick a program that's going to do one thing and do it well. One of the things that I've found that I've kind of like about it is that a lot of these programs that are out there do a really good job of telling you where you spent your money, but they don't tell you too much about where you're going to spend your money. But YNAB seems to take that approach. They're more forward looking. Where are you going to spend that dollar that's sitting in your checking account versus where did you spend it? A month ago?

Doug: [00:14:04] And that's like looking at the wake your boat and deciding where to go. That's where we've been. And it's a real paradigm shift for people because so many people think of whether it's a spending plan or budgeting is really a projection. Here's what we make. Here's what we're gonna spend YNAB doesn't do that. And zero dollar budgeting doesn't do that. Now, zero. Giving every dollar job, zero dollar budgeting actually has some other connotations. But giving every dollar a job you can't spend or budget more money than you have. So now we're looking at where we're going with what we've got and people are frustrated. But I want to project out the whole rest of the year. You don't have enough money to live the rest of the year, do you?

Thom: [00:14:51] Now, unless the next paycheck comes in.

Doug: [00:14:53] And so the real value of this is you're living with reality every day.

Thom: [00:14:58] Seems like another value of it is that if you get control of this, you're not desperately waiting for that next paycheck.

Doug: [00:15:04] Well, that's one of the goals is now we can start making decisions. We talked about lack a little earlier. We're making decisions so that we have money when we need it. Most people are paying a credit card bill. And they think they're on top of it. They say, you know what, I pay my statement off every month and they're paying off charges from 60 to 30 to 60 days ago. They're not paying off what they charged yesterday because it's not on the statement. So what I want to move people from is 30 to 60 days behind to having the money you need for them for next month before the month starts. Then eventually get to living on last month's income. So it's often a two to three month catch up just to be current. And as if you had cash.

Thom: [00:15:47] So if I have the money in the bank right now that I'm going to be needing to live on three months from now, two months from now. Kind of sense that I might sleep a little better at night.

Doug: [00:15:57] You think the amount the amount of sleep people lose and it's amazing, it does. It affects every income level. I have a client who spends twenty seven thousand dollars a month and is losing sleep, wondering if he's going to have enough for his taxes. So we set aside money every time a check comes in for taxes,

Thom: [00:16:19] That's amazing.

Doug: [00:16:20] But no one's immune.

Thom: [00:16:23] I'm listening to this and I'm thinking this is a lot of work. How do I even get started?

Doug: [00:16:28] Well, there's a couple ways. YNAB has a lot of training videos and help. The reason I started this business is that I found that most people don't have a great deal of extra time and energy. So one way is to engage with someone like me that gets it all set up and just teaches you how to manage it. Once it's set up in the first setting.

Thom: [00:16:49] Tell me a little bit more. How do you how do you do that? How do you work with clients to get them going?

Doug: [00:16:54] Well, first of all, I do. We talked about what your goals and concerns are so that we make sure that we align this to what you want. Not just a can't program. And then I do something I call the Blitz, which is three to five hours in one session to get it 90, 95 percent setup. And what that means is that every account is entered, every account is balanced, and every dollar you have gets a job. And we build your spending plan. And I like to use the analogy of a garage. If we have a garage that messy and we're trying to get our car in. And finally, one day we hit thresholds and say, I've had it. I'm going to clean it up and we clean it up. And it looks great. And we get rid of a lot of stuff. We even have room for stuff. But a year later, we walk into the same garage and it's worse when I want to make sure I don't want to teach people how to clean it up. Because if you do it properly and learn the skills to manage it, you'll never have to do it again. So that's that's the difference. You can go figure out the new software yourself, and it is a different shift than what most people know. It's a different way of thinking. Fact When I started using it in 2014, after two years, I realized I messed it up so bad I did something called a fresh start and started over because I was managing it like I used to manage things and I made a mess.

Thom: [00:18:12] So we have to change your mindset a little bit.

Doug: [00:18:17] A lot. But it's not hard.

Thom: [00:18:18] Ok,

Doug: [00:18:18] It's just different.

Doug: [00:18:21] For example, one of the mindsets and YNAB doesn't push this as hard as I do, but I require it. When you're working with me is there's a stimulus. I bought something in response. What's next to there's a stimulus. I bought something. I'm going to spend ten to twenty five seconds jotting it down so I don't have anything later to add and have to track. It's done per transaction. It's extremely simple. You remember exactly what you bought and you'll know exactly where you spend what you have left because it showed you.

Thom: [00:18:53] Ok. Let me understand. Make sure I understand. So you say you got it down, so I'm carrying a notepad with me to the grocery store?

Doug: [00:18:59] These are all online with your phone and your computer, so you can just pull out your phone and and put it in and also remembers where you were, what payment methods used last time and what you categorized last time. So when you're buying gas, it literally doesn't take very long. If you go to the same place.

Thom: [00:19:16] So what you're going to do is go in and get people set up completely. If you haven't been tracking your spending up to this point and I put a category in there that everybody is going to have groceries and I have no idea, do I spend eight hundred dollars a month on groceries? Do I spend fifteen hundred dollars a month on groceries? How do I get started? How do I know how much to put into that bucket?

Doug: [00:19:40] Well, there's a couple of ways, depending on what I do with clients, often I'll go back and download and categorize your last month's spending. So now you have one month and then you decide from there because it really doesn't matter what's happened in the past. What we're trying to do is figure out what do we want to do going forward. So that's one way to do it. The other is a swag. The scientific wild ass guess you just whatever it is. Yeah, it's funny to you bring up groceries. That's one of the hardest things to stay within budget because the actual founder of YNAB in his book claims that in three years he was only on budget four times and he wrote the program. But it's just it's easy to spend too much. Oh, hey, that's on sale. It's stock up by more. Who knows? I'm hungry.

Thom: [00:20:29] Ok. Interesting. So I'm thinking this is a good place to take another break. And during that break, you might want to if you get a chance to go to FinancialWheel.net and at FinancialWheel.net We'll put a link to Doug's Web site and get in touch with him. We'll also put a link to YNAB there so that you can take a look at it. And my suggestion is that when you pull up that YNAB, the first thing you do is go in and take a look at their introductory videos. As Doug mentioned, They're a fun company. Their videos are fun. They've got a great approach to this whole thing. And you'll learn a lot right there and kind of get introduced to the whole idea and the concept. So that's Financial Wheel.net. And we'll be back shortly with Doug.

Thom: [00:21:35] Welcome back to the Financial Wheel Podcast. My guest today is Doug Peterson, who, as I mentioned before, is really dedicated to making a positive difference in people's lives by helping him get control of their cash flow. And during the break, we were talking about this and one of the questions that came up was how soon should you start this? How young of a person should get started on this? And Doug, you had kind of an interesting story. You want to share that.

Doug: [00:22:00] Well, the earlier the better. And I would say that kids with cell phones now you can do it as early as eight years old. And the idea is if they have money that they're in charge of and this will be hard for a parent, let them make mistakes. Let them spend all their money on a giant thing of fishes at Costco if they really want that and then realize, wow, I'm out of money. I have to make a different choice later. Or they really want that one hundred dollar electronic game and realize I have no money left. One great story I heard was a child who was going to summer camp and the guy that had twenty dollars just been at the camp store. I wish I had twenty dollars for the camp store. We'll teach them. They can have it next year. You just save it. Only a couple bucks a month and you'll have it.

Thom: [00:22:47] So it sounds like one of the cool things about YNAB and getting control of this is that you can really get the whole family involved with it.

Doug: [00:22:54] Yeah. I would say the tendency is to find something great and say, boy, everybody needs this and then tell them about it, and I would caution you and I say do it, learn it really well, model it and then say to your kids, now you're gonna do what we do, not what I want you to do that we don't do.

Thom: [00:23:16] Right. cool, cool. So I know that coaching people around their cash flow is one of the key things you do, but you sort of get involved in a few other areas, they help them get control as well. Can you share a little bit about that?

Doug: [00:23:31] Yeah. So there's debt. People have car debt. Credit card debt. Lines of credit. It's all over the place. One of things we do is look at what is the debt, what's the cost? It's a way to restructure it. We look at credit scores. How do we increase your credit scores when you're getting a quote on your insurance? They base your rate in part on your credit score. Same thing with life insurance. So we look at other ways to maximize costs and income and take your cash flow and do a strategy to convert it into free airline miles. You can take vacations. I currently have one million one hundred thousand miles and a credit score of 8, 15 and 20 open credit cards, all that are paid off. And it's just a way to take what you've already got and leverage it so that you can get more return.

Thom: [00:24:20] Sounds great. So if you go to our Web site, FinancialWheel.net. I'll Repeat that again, because I realize that you're probably someplace where you can't write this down right now where you're listening. So it's FinancialWheel.net and we'll have a link to Doug's Web site and you can see how to get in touch with him if you want to learn more about some of these things sort of as we're wrapping this up. Do you have any practical examples of how this has made a difference in somebodies lives to get control of their cash flow?

Doug: [00:24:49] My son got on this program and he was making a decent income, but not a big income for our area. And he went from 4000 in debt to 5000 in the bank in 10 months just by knowing where his money went and deciding what was important to him.

Thom: [00:25:07] And from your experience, is that an unusual story or is out a fairly common story?

Doug: [00:25:13] It's a fairly common story. Whether it's saving money or restructuring debt or spending less, wasting less. It just depends on the situation. But typically, people can save anywhere again, depending on your income from two thousand fifteen thousand the first year.

Thom: [00:25:31] Wow, that is that's just amazing results, so it's it's really pretty positive getting control of your cash flow and understanding where your money's going.

Doug: [00:25:39] But the real value is the peace of mind. It's aligning your money, which is your life energy, going out and working to create this with what you want your money to do for you and what's important to you, which is why I named my company Get Priorities Straight.

Thom: [00:25:55] Ok, that sounds great. And you know, one of the things that I've been telling people for years is that the best investment you're ever gonna make is a good night's sleep. So, you know, a small investment of time and a real sort of minor investment of money to get control of your cash flow like this is probably going to be one of the best investments you make because it's going to help you get a good night's sleep.

Doug: [00:26:17] Agreed.

Thom: [00:26:18] Great. Doug, thanks again for being on the Financial Wheel Podcast today and for your thoughts about managing cash flow. And be sure to go to FinancialWheel.net where you can find a link to Doug's Web site and also a link to YNAB. Also on that site, there's an opportunity to test the water where you can fill out a couple of short forms. Send them in and we'll give you some responses, along with some items to help you get through some of the transitions that you're looking at. So if you're listening today and you're interested in getting more information about this, you can go to GPSPDQ.com and there you'll be able to get in touch with Doug where you can have a free no obligation conversation with him about your cash flow and how he might be able to help you. Again, that's GPSPQ.com. Also, we will have a link to that Web site on the financial wheel dot net Web site so you can go to FinancialWheel.net and link there or you can go to GPSPQ.com. So with that, keep your conversations positive and constructive.

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16. Other


Financial Life Transitions

1. Purchase a home:

2. Sell a home:

3. Relocate:

4. Purchase a vacation home / timeshare:

5. Re-evaluate investment philosophy:

6. Experience investment gain:

7. Experience investment loss:

8. Debt concerns:

9. Consider investment opportunity:

10. Receive inheritance or financial windfall:

11. Sell assets:

12. Other:


Family Life Transitions

1. Change in marital status (marriage):

2. Change in marital status (divorce):

3. Change in marital status (widowhood):

4. Expecting or adopting a child:

5. Hire child care:

6. Child entering adolescence:

7. Child with special needs:

8. Child w/pre-college expenses:

9. Child going to college:

10. Child getting married:

11. Empty nest:

12. Family special event (Bat/Bar Mitzvah, anniversary party, trip):

13. Helping and/or gifting grandchildren

14. Concern about aging parent

15. Concern about health of spouse/partner or child:


Legacy Life Transitions

1. Increase charitable giving:

2. Give special financial gifts to children/grandchildren:

3. Give parental pension (monthly stipend):


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