COLOURS OF MONEY

Financial Wellness: How to move out of the dark and into the BLACK

By Dwayne Richards, CPA

In the context of financial well-being, what does the colour black represent? In this article, I explore two interpretations and combine them for an inspiring finish!

Photo Credit: Nik Shuliahin, Ukraine

IN THE DARK How it feels when you have financial problems and are struggling to track your cash-flow

Photo Credit: Eye for Ebony

IN THE BLACK A state of financial well-being where you are financially solvent and making a profit

I’VE BEEN THERE!

Have you ever been financially stuck? Have you ever been in a situation where you knew your expenses were greater than your cash flow, but you weren’t sure how to break out of the loop? I’ve been there, and here’s my story.

Five years after losing my corporate job as a Finance Manager, I was five years into my separation, working towards finalizing the divorce, and my ex and I owed a mortgage that was leading us towards bankruptcy and not the financial freedom we expected from investing in real estate. So, we decided to sell the house, and it was just before the market correction in the spring of 2017. We asked our sons how they would feel if we moved; their one question was, “would we go to the same school?” The answer was, “We will do our best to make it happen.” It was decided, and the “For Sale” sign went up on our front lawn shortly after our family meeting.

SO WHAT?

When it comes to money, do you have an old pattern or belief holding you back? I certainly did!

My belief that home ownership is a sign of being financially successful is no longer the case for the average individual or family. I tried so hard to hold onto that house that I nearly went bankrupt. Paying down debt like a mortgage is easy when you have positive cash flow; however, when life gives you challenges—like the loss of a job, that same mortgage payment can become a real challenge.

After paying out the mortgage, realtor fees and lawyers fees, I received my portion of the balance/equity from the sale of our house. That equity provided the opportunity to pay off my debts, outstanding credit balances, and provided cash flow for everyday living.

The sale of the house also simplified the final steps of our divorce, so there was no money owed to either party. What could have been a dark life event of selling our family home turned out to be a bright opportunity!

YOUR FIRST 3 STEPS TO FINANCIAL ENLIGHTENMENT

Usually when my clients struggle with cash flow, it’s because they are in the dark – they don’t know where all their money goes, they know it’s not enough, and they don’t have a plan for changing this pattern. These are the three topics we explore and document together before deciding what to do next. It all comes down to understanding your needs and wants, that money is emotional, and understanding your behavioural spending, and moving from budgeting to a cash flow mindset.

03 FINANCIAL CONSCIOUSNESS

Where, exactly, is your money going and where are you choosing to spend it?

02 HOW MUCH DO YOU NEED?

Exactly how much money do you need, on a monthly basis, in your current living situation?

01 IDENTIFY NEEDS VS. WANTS

Why do you spend your money on certain things? Are there expenses you can defer?

CASH FLOW PLANNING

The theory of cash flow planning is to shift your mindset to telling your money where it’s going to go. Too often my clients rely on other people to tell them where their money should go and how to plan their budget. Other people don’t necessarily have the same values as you do and will make recommendations that don’t fit your desired lifestyle. With cash flow planning, you allocate your money to support your personal goals and dreams.

When it comes to cash flow planning, stepping out of the dark and into the light can be unsettling at first, but after you adjust, new paths and opportunities become available to you. It all comes down to understanding your needs and wants, that money is emotional, understanding your behavioural spending, and moving from budgeting to a cash flow mindset.