Yesterday I wrote a short article called ‘New Money Today’. The theme was on writing your financial situation in the form of a cash flow forecast. You can read the original post here. What I didn’t mention was that when I went to find a suitable image to support the post I couldn’t find a sample of a cash flow forecast that linked the time periods. For a single month, you have your starting cash position, your income minus your expenses and you arrive at a total that gives you a positive or negative number at the bottom. This obviously affects your starting cash balance for the next month, and it also affects your cumulative cash position over many months.
The information gleaned from this simple calculation is life changing. It highlights trends and total cost of benefit of spending or earning at different times. When I couldn’t find an image a created a sample to use with the ‘New Money Today’ post. Later in the day I was working with a client and when I showed her the result of only a few months of the cumulative cash position in her life, it dramatically altered her thinking about her entire financial future. To gather the initial information for a rough forecast took only a few minutes. It’s a simple calculation that isn’t taught in basic financial planning and when I mention it in financial circles I’m usually told it’s an advanced strategy. Odd…I remember the long calculations required for analyzing financial statements as part of my licensing requirements and those were much more complicated and advanced than the simple math to create a potentially life changing cash flow model.
“Write down the revelation and make it plain on tablets so that a herald may run with it. For the revelation awaits an appointed time; it speaks of the end and will not prove false...” (Habakkuk 2:2-3).
When you’re gathering financial information, you want the whole picture which includes the impact of time, then you’ll see the cumulative impact of decisions and revelation for when, and how much new money is required and can be created (or not) by the decisions you make today.