Cashflow Planning versus Budgeting

Have you ever had that sinking feeling in the pit of your stomach when you realize you scheduled a budget review meeting for yourself or with your significant other? I sure have! It never failed a couple days before I would start to over analyze my transactions, think about how I could justify my expenses or prove that clothing item makes huge sense in my bigger picture planning. It is a terrible feeling, my own shame and buyers regret made me feel little and incompetent.

Then my husband and I implemented a different approach; we started looking at our cashflow rather than 6 months or a year of expenses. It was life giving, allowed us to get back on the same page and work together to complete the weekly challenge of staying within our emotional spending limits.

We worked out a process that removed our fixed expenses from our emotional expenses. We knew what our fixed expenses were and we knew that based on our plan we weren’t winning or losing because of our mortgage payments, utilities or cellphone bills. We were getting knocked down because of our emotional expenses.

Emotional expenses are tricky because you start the month reminding yourself you have X to spend on groceries and dining out. The month gets started with you feeling in control, then there are some unexpected sales at the grocery store, impulse grocery purchases due to a lack of a grocery list or too many extra little people helping you shop, or take out meals to save time. Its half way through the month and you might be close to the budget number and decide to ignore it this month and try again next month. More often than not it is a guilt ridden reactive feeling.

With a cashflow approach you are able to see how much you have to work with at any given time. When the question comes up, should we spend money on this, you are able to take control and give a confident YES or NO.

Budgets can be helpful when viewing reactive expenses, whereas with proper planning and design Cashflow Planning allows you to make in the moment decisions without the buyers remorse.