July 10, 2023 | January Smith IV

Your financial journey has a lot of milestones and transitions along the way. However, it generally breaks down into stages in which your needs, goals, and risk profile may look different than in earlier or later stages.

The midpoint of your career, when your income has increased, and you have some visibility into your likely earnings trajectory, usually corresponds to other responsibilities. These may include home ownership, creating a family, saving for kids’ education, and increasing retirement savings. And, of course, higher income means higher taxes.

Creating a flexible financial plan that protects your family, grows your assets, and minimizes taxes is the foundation of building wealth. At this stage, you are starting to accumulate enough that mistakes and missed opportunities can be very costly.

Cash flow planning is the foundation of your financial plan, and it needs to be specific to the stage you are in. 

Understanding the Planning Mindset

While budgeting is part of cash flow planning, the goals of each are very different. Budgeting is about making choices to keep spending in check, with almost a scarcity mindset. It is about current expenses and works best over a short-term time horizon. Cash flow planning looks at the short-term and the long-term. It is a tool to help you make decisions that will help you achieve future goals. 

The process helps you identify future income and expenses and plan for big-ticket items. The result becomes part of your financial plan and dictates changes to across your financial plan. Understanding and detailing your flows keeps your investments tracking. It ensures you are realistic about return opportunities and gets you thinking big picture, including minimizing taxes and protecting your assets. 

Getting Into the Process and Tactics

Income minus expenses equal cash flow. It’s as simple as that.