I've had a lot of financial advisors tell me they add a lot of value for their clients by assisting with cash flow. I always kind of chuckled at that. What's so tough about cash flow? Well, lately I'm gaining a little more appreciation for it.
The spending amounts on our budget are dwarfed by the various cash flows coming in and out. It seems insane to worry about a $50 expense when there's $50,000 moving from here to there on the same spreadsheet. It came to a head tonight at our budget meeting. Our monthly budget called for us to invest $47K this month. Well, that's exciting. Except I can't find $47K anywhere to invest. So I go over to reconcile it with the spreadsheet that shows the various things our savings is earmarked for- you know, an emergency fund, some various sinking funds, and mostly taxes. Well, the spreadsheet says we're supposed to have one amount, but the amount actually in the account is $29K short of what is supposed to be there, rather than $47K extra. So where's the $76K? Nowhere to be found. Well, except in the checking accounts, where it is mostly earmarked for various other things like business expenses and the WCI scholarship funds etc. It's really a virtual $47K. It doesn't actually exist anywhere except in my future earnings or in money already earmarked for something else.
Bottom line, when we changed our cash flow system to try to make it easier to reconcile the two spreadsheets, we started investing the earnings from the next month while using the earnings from the previous month on the budget, or since money is fungible, investing money earmarked for the taxman and taking advantage of the float I've acquired due to the various tax laws (like the fact that Utah allows you to pay your entire 2017 tax bill in April 2018.) So when this gravy train stops, we're going to be short a month's worth of fat income that we owe to the taxman. I'm not so comfortable with that. But to fix it requires me to hold even MORE in cash (we already have lots of cash), which I dislike, and to hold back investing for a month or two, which I also dislike.
At any rate, I now have new respect for docs and their advisors struggling with cash flow issues. It's easier for me to understand how people end up owing the IRS $150K and having no idea why they don't have it.
The spending amounts on our budget are dwarfed by the various cash flows coming in and out. It seems insane to worry about a $50 expense when there's $50,000 moving from here to there on the same spreadsheet. It came to a head tonight at our budget meeting. Our monthly budget called for us to invest $47K this month. Well, that's exciting. Except I can't find $47K anywhere to invest. So I go over to reconcile it with the spreadsheet that shows the various things our savings is earmarked for- you know, an emergency fund, some various sinking funds, and mostly taxes. Well, the spreadsheet says we're supposed to have one amount, but the amount actually in the account is $29K short of what is supposed to be there, rather than $47K extra. So where's the $76K? Nowhere to be found. Well, except in the checking accounts, where it is mostly earmarked for various other things like business expenses and the WCI scholarship funds etc. It's really a virtual $47K. It doesn't actually exist anywhere except in my future earnings or in money already earmarked for something else.
Bottom line, when we changed our cash flow system to try to make it easier to reconcile the two spreadsheets, we started investing the earnings from the next month while using the earnings from the previous month on the budget, or since money is fungible, investing money earmarked for the taxman and taking advantage of the float I've acquired due to the various tax laws (like the fact that Utah allows you to pay your entire 2017 tax bill in April 2018.) So when this gravy train stops, we're going to be short a month's worth of fat income that we owe to the taxman. I'm not so comfortable with that. But to fix it requires me to hold even MORE in cash (we already have lots of cash), which I dislike, and to hold back investing for a month or two, which I also dislike.
At any rate, I now have new respect for docs and their advisors struggling with cash flow issues. It's easier for me to understand how people end up owing the IRS $150K and having no idea why they don't have it.
Comment