Cash flow is the foundation of a financial plan. Without good cash flow management, the financial plan is unlikely to succeed. The first step is to track what you spend and where you spend it. This can be done with pencil and paper, an Excel spreadsheet, or preferably a software program such as Microsoft Money, Quicken, or QuickBooks.

The next step is to assess whether you are living within your net income. If you are, you are one step ahead of many people who rely on bonuses during the year to make ends meet. If you are relying on your bonus, look for ways to cut expenses. Financial Innovations, LLC can provide help in this area by noting expense categories that seem high compared to the normal pattern of cash flow that we have seen in our overall client base.

When a realistic cash flow has been developed, you have a solid basis for calculating the amount of savings that your financial independence will require and how much life insurance you need. In doing this, we factor in the full scope of your goals, such as education planning, a second home, or a new car.

Once we have established what it will take to meet your goals in full, you are in position to analyze cash flow to find the necessary savings, or makes changes in the goals.