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How to Make the Most of Your Bonus (and Other Variable Income)
by Eric Roberge, Beyond Your Hammock
Variability in your cash flow can introduce some unique financial planning challenges, even for high-income earners. Managing money around an uneven distribution of pay is a learned skill, which is why more money really can lead to more problems.
Don't get stuck questioning how to organize your income or put your cash to best use. Here’s what you need to understand to make the most of your bonus money or other lump-sum payments.
Focus on Cash Flow Over Your Entire Life
by Joe Morgan, Best Financial Life
If your goal is to do everything you want in life and die with at least a dollar in your bank account, or whatever amount you want to leave to your kids, then there is a simple equation that will tell you if you are on the right track.
What you have + What you make – What you spend = Cash Flow
It's what you have plus what you make minus what you spend. Every part of your financial life must make this equation work. None of this comes from rules of thumb or guesses as to what the average person or even what your neighbor does.
Better Manage Lump Sum Payments to Achieve Financial Goals
by Eric Roberge, Beyond Your Hammock
For our financial planning clients, managing lump sum cash inflows is a constant conversation. Although the source of the money can vary, cash flow management is a huge part of ongoing planning because most of the folks we work with have some form of variable income.
Getting this right becomes especially important when we’re talking about total incomes of $500,000 or more, when half or more of that sum will hit quarterly, semi-annually, or even once a year.
Managing big lump sums like that is a skill, and it’s something we have a deep experience in helping our clients with. Cash flow management can get complex not just due to the size of these cash infusions, but due to timing.
When you know you have the money you need on an annual basis, that’s great… as long as you have the ability strategize and plan around the timing of your cash inflows, outflows from expenses, management of short-term goal funding, as well as plans for long-term savings and investment contributions.
Build Margin of Error in Your Cash Flow Plan
by Joe Morgan, Best Financial Life
Life Happens.
No matter how much we plan or how much confidence we have in the future, it almost never turns out exactly as we expect. It might be fun to say you plan to die with nothing in your bank account but it’s not realistic.
Instead, allow for cushion in your cash flow so that you always have a little bit more cash than you had planned on having.
Following along with the blogs of financial advisors is a great way to access valuable, educational information about finance — and it doesn’t cost you a thing! Our financial planners love to share their knowledge and help everyone regardless of age or assets.
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