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Linking Cash Flow Management & Life

Planning Your Most Important

Client Conversation for 2009

Copyright 2009 First Step, LLC & Money Quotient, Inc.

Ben Coombs’ Questions

Where are you now?

Where do you want to be?

What are you willing to do to get there?

2Copyright 2009 First Step, LLC & Money Quotient, Inc.

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Life is Rational & Emotional

Life’s journey is perceived through a filter of both facts and feelings

Both facts and feelings drive financial decision making

Rational Emotional

Copyright 2009 First Step, LLC & Money Quotient, Inc.

What is Reality?

We each create our own version of reality

No two people see “what’s going on” in the same way

We are highly influenced by others in the development of these constructs

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Jacqueline KelmAppreciative Living

Copyright 2009 First Step, LLC & Money Quotient, Inc.

Why is this Important?

You and your client are coming from different places on just about everything

Helping your client to “see” and articulate his/her frameworks is often the first step to working through an issue

This kind of discovery process leads to proactive conversations

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CoachVille, LLC

Copyright 2009 First Step, LLC & Money Quotient, Inc.

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“Seek first to understand, then to be

understood.”

Stephen Covey7 Habits of Highly Effective People

Key to Effective Communication

Copyright 2009 First Step, LLC & Money Quotient, Inc.

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Life planning is a process of...

helping people focus on the true values and motivations in their lives;

“Experts Examine Emerging Concept of Life Planning” Journal of Financial Planning, June 2001.

Copyright 2009 First Step, LLC & Money Quotient, Inc.

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Life planning is a process of...

determining the goals and objectives they have as they see their lives develop; and,

“Experts Examine Emerging Concept of Life Planning” Journal of Financial Planning, June 2001.

Copyright 2009 First Step, LLC & Money Quotient, Inc.

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Life planning is a process of...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.“Experts Examine Emerging Concept of Life Planning”

Journal of Financial Planning, June 2001.

Copyright 2009 First Step, LLC & Money Quotient, Inc.

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“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.” Frederic M. Hudson

Mastering the Art of Self-Renewal

Living Life on Purpose

Copyright 2009 First Step, LLC & Money Quotient, Inc.

11Copyright 2009 First Step, LLC & Money Quotient, Inc.

Exploring Values &

Motivations

Facilitating a Goal Setting

Process

Creating a Framework for

Decision Making

Financial Planning

A Guided Process

3 key entry points

1. Levels of Satisfaction

©2009 Money Quotient & First Step Cash Management, LLC.

All Rights Reserved.12

©2009 Money Quotient & First Step Cash Management, LLC.

All Rights Reserved.13

2. Life Transitions

3 key entry points

©2009 Money Quotient & First Step Cash Management, LLC.

All Rights Reserved.14

3. Goal Setting

3 key entry points

Instructions

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Pick 2 areas where your satisfaction is relatively high1. For each area, discuss what has

contributed to your satisfaction2. What would a “ten” look like in each

area?

Pick 1 area where your satisfaction is relatively low1. Was there a time when your satisfaction

in this area was higher?2. What would it take to raise your

satisfaction one or two points?Copyright 2009 First Step, LLC & Money Quotient, Inc.

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Linking the Conversations

Financial Conversation

s

Life Conversatio

ns

Cash Flow

Copyright 2009 First Step, LLC & Money Quotient, Inc.

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Cash Flow as a Bridge

The life conversations help us understand the client

The financial conversations are the planners arena

Being able to transfer between those to areas is a powerful tool to facilitate change

Copyright 2009 First Step Cash Management, LCC & Money Quotient, Inc.

Cash flow as a guide1. Help them

understand what is real

2. Focus the client on on what they want

3. What resources do they have, and what can be done

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Reframing Ben’s questions

Ben’s questions:1. Where are you

now?2. Where do you

want to be?3. What are you

willing to do to get there?

Budgeting System Cash Flow Management

Looks Back Looks Forward

What went wrong? What do we want now?

Correcting Mistakes Working toward goals

Restrictions/Constricting Choices/Freedom

Constant tracking Automatic

©2009 Money Quotient & First Step Cash Management, LLC.

All Rights Reserved.19

What is the difference between budgeting & cash flow?

This is your client’s Cash Flow

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Income into

household

Home MortgageCar

LoanUtilitie

s

Credit Card

Groceries

Entertainment

Dining

Shopping

CashATM“Mad

Money”

Master Checkin

g Account

Credit Card

Insurance

Medical

A New Way to Talk about Cash Flow

Imagine that your client has three “buckets” of money…

Let’s shift our thinking a bit…

What’s in the Buckets?

• Static Bucket™ – the money that has been spent, or agreed to be spent, at some point in the past

• Control Bucket™ – the money will be spent in the next 7 days

• Dynamic Bucket™ – the money that will be spent in the future

Adding the concept of time to cash flow

Static Bucket™

Control Bucket™

Dynamic Bucket™

Money Past Money Present

Money Future

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Linking the Conversations

Financial Conversation

s

Life Conversatio

ns

Cash Flow

Copyright 2009 First Step, LCC & Money Quotient, Inc.

25Copyright 2009 First Step Cash Management, LLC & Money Quotient, Inc.

Cash Flow as a Bridge

“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.”

26Copyright 2009 First Step Cash Management, LLC & Money Quotient, Inc.

Cash Flow as a Bridge

“By showing them a simple analysis of three numbers and a corresponding bar chart”

27Copyright 2009 First Step Cash Management, LLC & Money Quotient, Inc.

Case Study

• Young couple, 2 small children• Husband works in the family business• Concerns expressed in handwritten questionnaire:• Living within means• Plan for retirement• Plan for education• Would like help in understanding and creating

options

Copyright 2009 First Step Cash Management, LLC & Money Quotient, Inc. 28

Case Study - L.T.S.

Currently Exp.• Change in career

path• Start a business• Retraining• Debt concerns• Sell assets

Short Term• Sell a home• Buy a home• Relocate• Experience

investment gain• Develop an estate

plan• Increase charitable

giving• Hire child care

Long Term• Sell business• Purchase a

vacation home• College

Copyright 2009 First Step Cash Management, LLC & Money Quotient, Inc. 29

Case Study – F.S.S.

4’s & 5’s• Relationships with financial

service providers

1’s & 2’s• Ability to meet financial

obligations• Current income• The “extras” that I can buy• The amount of money I save

on a regular basis• My feelings about my money

life• Financial issues don’t cause

strain or stress in my relationships

Copyright 2009 First Step Cash Management, LLC & Money Quotient, Inc. 30

Case Study – Money Scripts

Husband• The company will always

be there• Don’t need to personally

save money – company always provides

Wife• Money always was taken

away from me, why save• Money won’t be there, live

for today

31Copyright 2009 First Step Cash Management, LLC & Money Quotient, Inc.

Case Study – The Results

• Moved out of state from the Quad Cities• Sold house in Q.C., renting until things are more clear

in the new community• Paid off both cars, $0 on credit cards• Cash Reserve established• Learned to manage cash flow, and then

systematically fund mutually identified goals• Continually update First Step with changes in goals,

income, and bills• Just about every goal has been addressed 1 ½ yrs

later

32Copyright 2009 First Step Cash Management, LLC & Money Quotient, Inc.

The Results

• We used MQ tools as key discovery tools in the initial interview and to guide our advice and how we delivered the advice.• We used used cash flow as a tool to figure out what

was real, and to understand how they make decisions• We used more traditional planning tools, such as

Finametrica and Financeware, to create advice that was likely to help them reach their goal

• Positive conversation• Awareness• Both spouses needs and

wants• Sense of freedom • Focus is on goals

©2009 Money Quotient & First Step Cash Management, LLC.

All Rights Reserved.33

Why does cash flow fit LP?

• Customizable for each client’s lifestyle• No over spending• Eliminates credit card abuse• Promotes saving for future purchases• Creates a framework for daily decision

making•Accurate and reliable numbers•Success of the financial plan

©2009 Money Quotient & First Step Cash Management, LLC.

All Rights Reserved.34

What’s in it for the planner?

• Peace of mind• Bills paid automatically• Savings transferred automatically

•Sense of Freedom•Freedom to spend weekly money•No Advisor’s Judgment

•Excitement and Motivation•Sit back and watch Dynamic Accounts

grow©2009 Money Quotient & First Step Cash Management, LLC.

All Rights Reserved.35

What’s in it for the client?

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Linking the Conversations

Financial Conversation

s

Life Conversatio

ns

Cash Flow

Copyright 2009 First Step, LCC & Money Quotient, Inc.

The continual cycle of discovery, goal setting, implementation, and review.