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Mid-Point of your Career: Cash Flow Planning

Financial planning isn’t static - your journey has several milestones and transitions along the way. As you progress, your needs, goals, and risk profile may look different than at other times in life.

In the middle of your career, your income is higher, and new responsibilities also become a priority – such as home ownership, starting a family, saving for kids’ education, and increasing retirement savings.

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

Beginning the Process: Monthly Income

This means monthly net income after taxes, across all sources, including salary, rental income, reliable investment income, etc.

Identify Your Expenses

These usually include:

  • Debt: credit cards, leases, mortgage payments, and loans (personal, education)

  • Taxes except for salary taxes, which is covered in net income

  • Basic monthly expenses: Housing, food, gas, cable, phone, etc.

  • Discretionary expenses: Dinners, trips, purchases

  • Savings: Cash reserve savings, retirement or education savings, big-purchase savings

  • Insurance costs: Home, health, professional liability, auto, potential umbrella policy

  • ·Unexpected expenses: Anything out of the norm – vet bills, car or home repair, etc. To get a realistic annual figure, average the last three years of these

Goal Setting

Identify your short and long-term goals over a 5-10 year time horizon. These could be education savings, second home, home improvements, early retirement, starting your own business, etc. Developing and working towards goals is the essence of cash flow planning.

Building a Strategy

The planning part links your cash flow to your future expenses. The process uses the outcome of your cash flow planning to create a road map to get to each goal. Different strategies are devised for each to guide better outcomes. When done correctly it can uncover gaps in your financial plan. For example:

  • Are my investment account allocations appropriate for my goals?

  • Do I have the opportunity to save money by refinancing debt?

  • Am I maximizing tax-efficiency by saving in retirement and health saving accounts? accounts?

  • Can I diversify my income stream or invest in more tax-efficient sources of income, such as real estate?

When deploying your cash flow planning strategy, it’s critical to periodically check in to see if you are making progress toward your goals. Getting the right systems in place can ensure you hit savings goals and save as much as possible for retirement.

The Bottom Line

As your financial journey unfolds, it’s important to ensure that it remains aligned with your goals as life circumstances change. As time passes, your goals will evolve, and your resources often increase. Ensuring that your planning matches your life stage is critical to growing wealth and staying on track as you move forward.


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