The first quarter of the year is an ideal time to get your finances in order. Whether because it made your New Year’s resolution list or because financial tasks got pushed aside last year, this is a natural time to take stock. If you’ve never created a financial plan, now is an excellent time to start. And if you already have one in place, it’s a good opportunity to update it and see where things stand.
Comprehensive financial planning touches many areas of your financial life, including:
All of these are important, but perhaps the most critical component of your financial plan is your cash-flow analysis.
Cash-flow analysis looks at money coming in (income sources), money going out (spending, debt payments, and savings), and what remains over a defined period of time.
Your result will fall into one of three categories:
You may track your spending closely, or you may not pay much attention to how much you spend each month and exactly where that money goes! That’s understandable - life is busy, and many transactions happen automatically these days.
The reality, however, is that your cash flow determines what is financially possible. Understanding it clearly can increase your confidence, reduce uncertainty, and support better decision-making. It also helps you see whether you’re on track to build the nest egg you’ll need for retirement, or if small adjustments are needed today that will make a meaningful difference in your future.
Identifying your income, savings, investments, and debt payments is usually straightforward because those figures are easy to locate. The more time-consuming part is determining accurate expense numbers for planning projections. Your fixed expenses are relatively simple to calculate since statements and bills provide clear amounts. Your variable (discretionary) spending is more challenging because it fluctuates and is often spread across multiple accounts and payment methods.
Fortunately, the first quarter of the year is an ideal time to gather this information. Many banks and credit card companies provide annual spending summaries by category, which can make compiling accurate numbers much easier. It is also the time of year that you are collecting financial information to file your tax returns.
Once your current cash-flow analysis is complete, projections can be run using different assumptions to see how potential decisions might affect your financial picture. For example, what would your outlook look like if you purchased a beach house in 2028? Or if you retired three years earlier than planned? This is where financial planning - and specifically cash-flow modeling - becomes especially valuable. It helps you clarify what is feasible, what trade-offs exist, and what options are available.
In practice, you may discover one of two things. You might realize you’re considering spending decisions that your finances may not comfortably support, or you might find the opposite - that you’ve been holding back on goals or experiences you assumed were out of reach, when in fact they’re well within your means.
Knowledge truly is power. A thoughtful cash-flow analysis, completed as part of your comprehensive financial plan, equips you to make informed decisions and move forward with clarity and confidence.
Contact your Carnegie Advisor if you’d like to begin or update your financial plan.
For informational and educational purposes only. The information is not intended to provide specific advice or recommendations, and the information has been obtained from sources believed to be reliable.
Carnegie Investment Counsel (“Carnegie”) is a registered investment adviser with the Securities and Exchange Commission. Registration as an investment adviser does not imply a certain level of skill or training. For a more detailed discussion about Carnegie’s investment advisory services and fees, please view our Form ADV and Form CRS by visiting: https://adviserinfo.sec.gov/firm/summary/150488.
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