Helping ends meet

You know how much money you bring home every month and the related expenses.  The math says there is an amount left over, but does it ‘feel’ like that amount will be there when the calendar strikes the 31st?  Even if money is left over, how can you balance your cash flow to ensure you arrive at the end of the month intact.

Consumer accounts such as credit cards, automotive insurance, utilities and mobile phones may allow changes to the bill due date.  You may be asking yourself (and me) if there is a meaningful difference to adjusting the date by a day or two.  Let’s look at the example budget with the following facts:

• Monthly net income: $3,200

• Monthly scheduled bills: $2,894

• Monthly unscheduled expenses: $250
  gas, groceries and entertainment

• Remaining at the end of the month: $56.00

1st scenario reflecting a deficit between the 1st and 15th of the month

The calendar calculates each week’s income and scheduled expenses.  The current scenario leaves -$19.00 after scheduled bills are paid between the 1st and the 15th ($1,600 – $1,619).  Mathematically, all bills were paid in full, but our household still needs gas and basic groceries during that time.  Put yourself in the shoes of our example household and measure your comfort level.  I suspect it is low.  And discomfort leads to a lot of stress!  Even with a modest savings account, anything unexpected, from an unplanned visit to the grocery store or a trip to Urgent Care could be a heart rate raiser as money gets spent. 

Let’s bake in one assumption – the household uses the credit card to purchase gas and groceries because they don’t have the money.  What is the result of moving one due date from the 13th to the 15th? 

2nd scenario reflecting a balanced cash flow after shifting one bill due date

Full disclosure, I made up all the numbers in this budget.  Oddly enough, in the updated scenario, moving the credit card due date perfectly balanced the monthly cash flow - $1,447 in each pay period.  More importantly, the shift means the household moved out of the red into the black.  The qualitative difference is 10X in peace of mind.  This change brought about another unexpected consequence.  Shifting the gas and groceries from the credit card to the cash flow means that the monthly credit payment can truly start reducing the debt balance. 

Keep in mind that we didn’t discuss whether or not the household needed all these expenses.  We simply endeavored to smooth out the cash flow.  As a financial coach, I would discuss with these clients the deeper details of each expense.  It is clear the budget is tight, which brings its own anxiety.  Now that the scheduled bills are paid, we can talk about ways to increase income and reduce the expenses. 

I went through this same simple exercise with my budget. Made a few phone calls and it yielded a difference close to $300 from one pay period to another.  Can this apply to your budget?  Drop us a note at letstalk@studiomfinancial.net if you would like to discuss.  Remember our principle: 50% uncomfortable, 70% incremental, and100% vital.  Until we meet…keep working on the change.