Transcript: Cash flow planning — A critical part of the financial planning process
[Soft music playing.]
[Cash Flow Planning, A Critical Part of the Financial Planning Process.]
[Jamie talking to the camera in front of a grey background.]
[CIBC logo. Jamie Golombek, Managing Director, Tax and Estate Planning, CIBC Financial Planning and Advice.]
Jamie Golombek: Cash flow planning is absolutely critical part of the financial planning process. Without cash flow planning, your whole financial plan is useless because you don't know how much money you have, how much you're taking in, and how much you're spending.
[Is paying off debt a priority?]
[Jamie talking to the camera in front of a grey background.]
According to a CIBC poll, 25% of Canadians found that paying down debt is their number one financial priority. That being said, why aren't they doing it? And the issue is you need to make debt repayment, like a regular budgeted expense.
[Young woman paying a bill through online banking on her laptop.]
So every month, if you're budgeting for groceries, and you're budgeting for rent or property taxes, you also need to put a line item in your budget for debt repayment.
[Top 3 tips for cash flow planning.]
So how do you achieve all this? Well, 3 quick tips.
[Tip #1. Write down your income and expenses.]
[Jamie talking to the camera in front of a grey background.]
First of all, write down all of your income expenses. The best thing to do is gather 3 months’ worth of information. When you analyze where the money's coming in, where the money is going out, are you net positive or net negative at the end of those 3 months? Now if you're net positive, that's a good sign. The question then is, what are you doing with that extra cash flow?
[A man making a purchase online use a credit card.]
Are you using it to pay down high interest debt like credit card debt at 20%?
[Jamie talking to the camera in front of a grey background.]
Or are you using it to perhaps save in an RRSP or TFSA for retirement?
[A group of students walking into a school.]
Maybe setting some money aside for your kids' postsecondary education?
[Jamie talking to the camera in front of a grey background.]
If you review your cash flow, and it's actually negative, then you need to take a step back and look at all the expenses that are coming out of those accounts in that 3-month period and see if perhaps there are ways to reduce some of that spending.
[A couple sitting in front of a laptop discussing their finances.]
Maybe you're spending too much on certain categories that may not be necessary, or that can be deferred until later because, after all, at the end of the day if you're spending more money than you're actually taking in, that becomes a big problem. It becomes much more difficult to achieve financial goals without getting further into debt.
[Tip #2. Pay yourself first.]
Number 2: pay yourself first.
[Jamie talking to the camera in front of a grey background.]
If the money comes automatically right off your payroll before you even see it, gets deposited into an RRSP or a TFSA, then you don't see it, you don't spend it.
[Tip #3. Review and prioritize financial goals.]
[Jamie talking to the camera in front of a grey background.]
And then finally, review and prioritize your goals. You may have different goals, some of them may be conflicting one with the other, paying down debt versus saving for kids' education.
[A young couple having a discussion with a financial advisor.]
Meet with an advisor and they will be able to help you be able to choose which goals you're going to meet first and which ones may take longer periods of time.
[Take action and contact your CIBC advisor today.]
[This video is provided for general informational purposes only and does not constitute financial, investment, tax, legal or accounting advice nor does it constitute an offer or solicitation to buy or sell any securities referred to. Individual circumstances and current events are critical to sound investment planning; anyone wishing to act on this document should consult with his or her advisor. The information contained in this video has been obtained from sources believed to be reliable and is believed to be accurate at the time of publishing, but we do not represent that it is accurate or complete and it should not be relied upon as such. All opinions and estimates expressed in this video are as of the date of publication unless otherwise indicated, and are subject to change. ®The CIBC logo is a registered trademark of Canadian Imperial Bank of Commerce (CIBC). The material and/or its contents may not be reproduced without the express written consent of CIBC.]