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The Seven “C”s of Financial Management


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Written by: Holly Isdale

I was talking with a client about stress and he shared that he worries about his finances nightly.  As his net worth would dwarf many within the 1%, this seemed odd but as I too am usually awake in the middle of the night with some epiphany about a client situation or worrying about something or other, I could sympathize!  Once we worked through is portfolio and rationalized the decisions (creating a very robust investment policy guideline and a re balancing matrix), he was noticeably relieved.

Lack of knowledge  — rather not having a true understanding of the realities of his situation, was the source of his unrest.

For me, lack of organization causes stress (which you’d never know to look at my drawers, closets or … worse, my desk).  However, from a financial perspective, getting organized is not as difficult as it sounds. I like to work through the Seven “Cs”:

CAPTURE — You can’t manage what you can’t see; take some time and list all your financial assets and liabilities in one place. Get an organizational system in place, even if its just putting things in piles on the floor so you can get everything out where you can see it. Think big picture and pull all accounts, retirement statements, social security statements, bank statements, credit cards and even your estate plans, insurance, etc. Then start to list your assets and liabilities (yes, its a balance sheet but this can be intimidating to some people as it sounds so “formal” and off putting to some clients). Its important to get everything you have put into one place.

CASH — Know your cash flow — despite working with all ends of the financial spectrum for decades, I can still count on one hand the number of people who had a good sense of their cash flow needs and what they needed in reserves. I have had very wealthy women clients who are afraid of being bag ladies, because they just don’t understand the size of their nest egg and how that cushion will protect them. Look at what you need now vs. what you need in 5-10-25 years as well. How will your income change and your outflows shift over time?  This is critical when you start to think about long-term care, retirement or assisted living needs as well.

CONTRACTS — Understand what your contractual obligations are or will be (mortgage, taxes, credit cards), what your inflows and outflows look like.  Are these contractual (I have to pay my mortgage every month) or discretionary (I can be fired at will and lose my income)? Here you can flip through those piles of information we pulled out in the first “C” of “Capture”!  Look for those charges you have forgotten about or things you might be overlooking. In doing cash flow analysis for clients, its amazing what you find when you really start to review credit card charges, and operational expenses. We have found gym memberships that keep accruing, that online yoga website you signed up for but never use, extravagant cell phone charges when a call to the carrier can often move you to a better plan, etc. These little things all add up.

COMMITMENTS — What have you committed, to yourself, to others, to pay out or to do? Think longer term — college, retirement, care for family, travel and then determine the costs for these. You may have to make tradeoffs but you also will feel better if you understand what the true cost is for different options than if you are fretting over perceived shortfalls. You make commitments to yourself subconsciously so this is a good time to do some introspection.  Write it down and then try to prioritize among these commitments.

CRISIS — What do you need if there is a crisis and what is likely to hit? You are more likely to be fired or disabled than to die so focus on cash reserves and long term care insurance; but think about life insurance as an income replacement tool (which means you opt for cheaper term insurance than more expensive annuities or whole life).

CONTAIN — Prioritize your commitments against your cash and figure out where you need to make changes. Its helpful to really look at your lifestyle overall and your outflows. If you are worried about your job stability, start planning now for alternatives in the event you are out of work. If you need to cut back on expenses, start talking to the vendors. You will find that many are willing to offer you lower rates or you can move to a different membership level, etc., to still be there.

CONTROL — By getting ORGANIZED as to where you have issues or concerns, you can also PRIORITIZE the areas of focus and then you have a discrete list to EXECUTE on which can alleviate stress. If you can take control, even in small ways, you will have a better sense of what is manageable, where you are on your overall plan for your finances and perhaps understand what are realistic financial fears, vs. ones that are coming from other areas in your life.

You still make wake up in the middle of the night in a cold sweat, but its probably just hormones… 

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