Linking Cash Flow Management and Life Planning

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FPA Anaheim/Nexgen 2009, joint presentation with Amy Mullen from Money Quotient

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Linking Cash Flow Management and Life Planning

  1. 1. 1<br />Linking Cash Flow <br />Management & Life Planning<br />Your Most Important <br />Client Conversation for 2009<br />Copyright 2009 First Step, LLC & Money Quotient, Inc. <br />
  2. 2. Ben Coombs’ Questions<br /><ul><li>Where are you now?
  3. 3. Where do you want to be?
  4. 4. What are you willing to do to get there?</li></ul>2<br />Copyright 2009 First Step, LLC & Money Quotient, Inc. <br />
  5. 5. 3<br />Life is Rational & Emotional<br /><ul><li>Life’s journey is perceived through a filter of both facts and feelings
  6. 6. Both facts and feelings drive financial decision making</li></ul>Rational<br />Emotional<br />Copyright 2009 First Step, LLC & Money Quotient, Inc. <br />
  7. 7. What is Reality?<br /><ul><li>We each create our own version of reality
  8. 8. No two people see “what’s going on” in the same way
  9. 9. We are highly influenced by others in the development of these constructs</li></ul>4<br />Jacqueline Kelm<br />Appreciative Living<br />Copyright 2009 First Step, LLC & Money Quotient, Inc. <br />
  10. 10. Why is this Important?<br /><ul><li>You and your client are coming from different places on just about everything
  11. 11. Helping your client to “see” and articulate his/her frameworks is often the first step to working through an issue
  12. 12. This kind of discovery process leads to proactive conversations</li></ul>5<br />CoachVille, LLC<br />Copyright 2009 First Step, LLC & Money Quotient, Inc. <br />
  13. 13. 6<br />Key to Effective Communication<br />“Seek first to understand,<br /> then to be understood.”<br />Stephen Covey<br /> 7 Habits of Highly Effective People<br />Copyright 2009 First Step, LLC & Money Quotient, Inc. <br />
  14. 14. 7<br />Life planning is a process of...<br /><ul><li>helping people focus on the true values and motivations in their lives;</li></ul>“Experts Examine Emerging Concept of Life Planning” <br />Journal of Financial Planning, June 2001.<br />Copyright 2009 First Step, LLC & Money Quotient, Inc. <br />
  15. 15. 8<br />Life planning is a process of...<br /><ul><li>determining the goals and objectives they have as they see their lives develop; and, </li></ul>“Experts Examine Emerging Concept of Life Planning” <br />Journal of Financial Planning, June 2001.<br />Copyright 2009 First Step, LLC & Money Quotient, Inc. <br />
  16. 16. 9<br />Life planning is a process of...<br /><ul><li>using these values, motivations, goals, and objectives to guide the planning process and provide a framework for making choices and decisions in life that have financial and non-financial consequences.</li></ul>“Experts Examine Emerging Concept of Life Planning” <br />Journal of Financial Planning, June 2001.<br />Copyright 2009 First Step, LLC & Money Quotient, Inc. <br />
  17. 17. 10<br />Living Life on Purpose<br />“When you have a dream and a plan working together in the construction of a life chapter, you have a ‘mission,’ a circumscribed purpose that defines your use of time and space for the duration of this particular life chapter. People with a mission know where they want to go.” <br />Frederic M. Hudson<br /> Mastering the Art of Self-Renewal<br />Copyright 2009 First Step, LLC & Money Quotient, Inc. <br />
  18. 18. 11<br />A Guided Process<br />Exploring <br />Values & Motivations<br />Creating a Framework for Decision Making<br />Financial Planning<br />Facilitating a <br />Goal Setting Process<br />Copyright 2009 First Step, LLC & Money Quotient, Inc. <br />
  19. 19. 3 key entry points<br />Levels of Satisfaction<br />©2009 Money Quotient & First Step Cash Management, LLC. All Rights Reserved.<br />12<br />
  20. 20. ©2009 Money Quotient & First Step Cash Management, LLC. All Rights Reserved.<br />13<br />3 key entry points<br />2. Life Transitions<br />
  21. 21. ©2009 Money Quotient & First Step Cash Management, LLC. All Rights Reserved.<br />14<br />3 key entry points<br />3. Goal Setting<br />
  22. 22. Instructions<br />15<br /><ul><li>Pick 2 areas where your satisfaction is relatively high</li></ul>For each area, discuss what has contributed to your satisfaction<br />What would a “ten” look like in each area?<br /><ul><li>Pick 1 area where your satisfaction is relatively low</li></ul>Was there a time when your satisfaction in this area was higher?<br />What would it take to raise your satisfaction one or two points?<br />Copyright 2009 First Step, LLC & Money Quotient, Inc. <br />
  23. 23. 16<br />Linking the Conversations<br />Life Conversations<br />Financial Conversations<br />Cash Flow<br />Copyright 2009 First Step, LLC & Money Quotient, Inc. <br />
  24. 24. 17<br />Cash Flow as a Bridge<br /><ul><li>The life conversations help us understand the client
  25. 25. The financial conversations are the planners arena
  26. 26. Being able to transfer between those to areas is a powerful tool to facilitate change</li></ul>Copyright 2009 First Step Cash Management, LCC & Money Quotient, Inc. <br />
  27. 27. 18<br />Reframing Ben’s questions<br /><ul><li>Cash flow as a guide</li></ul>Help them understand what is real<br />Focus the client on on what they want<br />3. What resources do they have, and what can be done<br /><ul><li>Ben’s questions:</li></ul>Where are you now?<br />2. Where do you want to be?<br />3. What are you willing to do to get there?<br />
  28. 28. ©2009 Money Quotient & First Step Cash Management, LLC. All Rights Reserved.<br />19<br />What is the difference between <br />budgeting & cash flow?<br />
  29. 29. This is your client’s Cash Flow<br />Income into household<br />Credit Card<br />Cash<br />ATM<br />Master Checking Account<br />“Mad Money”<br />Credit Card<br />Dining<br />Insurance<br />Medical<br />Home Mortgage<br />Entertainment<br />Car Loan<br />Utilities<br />Groceries<br />Shopping<br />20<br />
  30. 30. A New Way to Talk about Cash Flow<br />Let’s shift our thinking a bit…<br />Imagine that your client has three “buckets” of money…<br />
  31. 31. What’s in the Buckets?<br /><ul><li>Static Bucket™– the money that has been spent, or agreed to be spent, at some point in the past
  32. 32. Control Bucket™– the money will be spent in the next 7 days
  33. 33. Dynamic Bucket™– the money that will be spent in the future </li></li></ul><li>Adding the concept of time to cash flow<br />Static Bucket™<br />Control Bucket™<br />Dynamic Bucket™<br />Money Past<br />Money Present<br />Money Future<br />
  34. 34. 24<br />Linking the Conversations<br />Life Conversations<br />Financial Conversations<br />Cash Flow<br />Copyright 2009 First Step, LCC & Money Quotient, Inc. <br />
  35. 35. 25<br />Cash Flow as a Bridge<br />“By showing them a simple analysis of three numbers and a corresponding bar chart, for the first time in their lives, they really begin to understand their money. From the planner’s perspective, many things begin to emerge. Money scripts begin to pop out without probing. The figures themselves describe the client’s values and priorities. From something as basic as cash flow, we understand their money decisions better than we ever could have before.”<br />Copyright 2009 First Step Cash Management, LLC & Money Quotient, Inc. <br />
  36. 36. 26<br />Cash Flow as a Bridge<br />“By showing them a simple analysis of three numbers and a corresponding bar chart”<br />Copyright 2009 First Step Cash Management, LLC & Money Quotient, Inc. <br />
  37. 37. 27<br />Case Study<br /><ul><li>Young couple, 2 small children
  38. 38. Husband works in the family business
  39. 39. Concerns expressed in handwritten questionnaire:
  40. 40. Living within means
  41. 41. Plan for retirement
  42. 42. Plan for education
  43. 43. Would like help in understanding and creating options</li></ul>Copyright 2009 First Step Cash Management, LLC & Money Quotient, Inc. <br />
  44. 44. 28<br />Case Study- L.T.S.<br />Currently Exp.<br /><ul><li>Change in career path
  45. 45. Start a business
  46. 46. Retraining
  47. 47. Debt concerns
  48. 48. Sell assets</li></ul>Short Term<br /><ul><li>Sell a home
  49. 49. Buy a home
  50. 50. Relocate
  51. 51. Experience investment gain
  52. 52. Develop an estate plan
  53. 53. Increase charitable giving
  54. 54. Hire child care</li></ul>Long Term<br /><ul><li>Sell business
  55. 55. Purchase a vacation home
  56. 56. College</li></ul>Copyright 2009 First Step Cash Management, LLC & Money Quotient, Inc. <br />
  57. 57. 29<br />Case Study– F.S.S.<br />4’s & 5’s<br /><ul><li>Relationships with financial service providers</li></ul>1’s & 2’s<br /><ul><li>Ability to meet financial obligations
  58. 58. Current income
  59. 59. The “extras” that I can buy
  60. 60. The amount of money I save on a regular basis
  61. 61. My feelings about my money life
  62. 62. Financial issues don’t cause strain or stress in my relationships</li></ul>Copyright 2009 First Step Cash Management, LLC & Money Quotient, Inc. <br />
  63. 63. 30<br />Case Study – Money Scripts<br />Husband<br /><ul><li>The company will always be there
  64. 64. Don’t need to personally save money – company always provides</li></ul>Wife<br /><ul><li>Money always was taken away from me, why save
  65. 65. Money won’t be there, live for today</li></ul>Copyright 2009 First Step Cash Management, LLC & Money Quotient, Inc. <br />
  66. 66. 31<br />Case Study – The Results<br /><ul><li>Moved out of state from the Quad Cities
  67. 67. Sold house in Q.C., renting until things are more clear in the new community
  68. 68. Paid off both cars, $0 on credit cards
  69. 69. Cash Reserve established
  70. 70. Learned to manage cash flow, and then systematically fund mutually identified goals
  71. 71. Continually update First Step with changes in goals, income, and bills
  72. 72. Just about every goal has been addressed 1 ½ yrs later</li></ul>Copyright 2009 First Step Cash Management, LLC & Money Quotient, Inc. <br />
  73. 73. 32<br />The Results<br /><ul><li>We used MQ tools as key discovery tools in the initial interview and to guide our advice and how we delivered the advice.
  74. 74. We used used cash flow as a tool to figure out what was real, and to understand how they make decisions
  75. 75. We used more traditional planning tools, such as Finametrica and Financeware, to create advice that was likely to help them reach their goal</li></ul>Copyright 2009 First Step Cash Management, LLC & Money Quotient, Inc. <br />
  76. 76. Positive conversation<br />Awareness<br />Both spouses needs and wants<br />Sense of freedom <br />Focus is on goals<br />©2009 Money Quotient & First Step Cash Management, LLC. All Rights Reserved.<br />33<br />Why does cash flow fit LP?<br />
  77. 77. Customizable for each client’s lifestyle<br />No over spending<br />Eliminates credit card abuse<br />Promotes saving for future purchases<br /><ul><li>Creates a framework for daily decision making
  78. 78. Accurate and reliable numbers
  79. 79. Success of the financial plan</li></ul>©2009 Money Quotient & First Step Cash Management, LLC. All Rights Reserved.<br />34<br />What’s in it for the planner?<br />
  80. 80. Peace of mind<br /><ul><li>Bills paid automatically
  81. 81. Savings transferred automatically
  82. 82. Sense of Freedom</li></ul>Freedom to spend weekly money<br />No Advisor’s Judgment<br />Excitement and Motivation<br /><ul><li>Sit back and watch Dynamic Accounts grow</li></ul>©2009 Money Quotient & First Step Cash Management, LLC. All Rights Reserved.<br />35<br />What’s in it for the client?<br />
  83. 83. 36<br />Linking the Conversations<br />The continual cycle of discovery, goal setting, implementation, and review.<br />Life Conversations<br />Financial Conversations<br />Cash Flow<br />Copyright 2009 First Step, LCC & Money Quotient, Inc. <br />

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