Family cash flow
Just like businesses rely on financial statements to track performance and make informed decisions, families can benefit from a similar tool: a family cash flow (FCF).
What’s a Family Cash Flow?
It's a comprehensive snapshot of your financial health, helping you understand your investments, make projections, and stay on track toward your financial goals. Important: A FCF is about long-term financial planning, not day-to-day expenses.
Why Create a Family Cash Flow?
Financial Awareness: Gain a deeper understanding of your investments and how they're performing.
Holistic View: See all your assets in one place, from short-term savings to long-term retirement accounts.
Goal Tracking: Track your progress toward financial goals and make informed decisions based on your projections.
Scenario Planning: Experiment with different assumptions to see how changes in income, spending, or investment returns could impact your future.
Creating Your Family Cash Flow
A FCF is essentially a spreadsheet that organizes your investments. It typically includes:
Investment Buckets: Categorize your investments into short-term, mid-term, and long-term buckets.
Accounts: List your specific accounts within each bucket (e.g., savings accounts, brokerage accounts, retirement accounts).
Current Values: Input the current value of each account.
Target Values: Set goals for each account based on your financial objectives and projected returns.
Projections: Use historical data and assumptions to forecast future account values.
While creating a spreadsheet from scratch can be rewarding, there are templates available online to get you started. Pro-tips: Customize the template to fit your specific financial situation and goals; and Keep it simple - the more complex your spreadsheet, the less likely you'll be to maintain it and use it effectively.
Here’s a template I created for myself:
As you can see, I compare the current year's figures with the previous year and my target amounts, based on the underlying assumptions. I then use these assumptions to forecast future years.
F is for Family
A family cash flow is a joint effort. Involve your spouse or partner in creating and reviewing it. Have a money talk over your FCF. Discuss your financial goals, share your accounts, and work together to make informed decisions.
By creating a family cash flow, you'll gain a clearer picture of your financial health and make more informed decisions about your future.
Let's Talk Money!
How could a family cash flow help you gain a better understanding of your finances and goals?
What steps can you take today to start building your own family cash flow spreadsheet?
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Disclaimer: This blog provides general financial information only, not professional financial advice. You are solely responsible for any decisions you make based on this info. Conduct your own research and consult with a qualified professional before making any financial decisions.