Most people think financial stress is about income, but it’s usually a broken cash flow system. In this episode of Wise Money, we walk through the three-bank account cash flow operating system that helps create stability, reduce stress, and build real financial confidence. You’ll learn how to properly manage monthly expenses, plan ahead for non-monthly costs, and stop getting blindsided by predictable surprises.
Season 11, Episode 19
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Transcript: How to Build a Cash Flow System That Actually Works
It’s time for Wise Money with Korhorn Financial Group with certified financial planners Kevin Korhorn, Mike Bernard, and Josh Gregory.
Segment 1: Welcome to another episode of the Wise Money Show with Korhorn Financial Group, where every week we’re helping you take your next wise step in your financial life. Thanks for being here, friends. My name is Mike Bernard. I am your host. I’m also one of the certified financial planners on the program. And with me in the KFG studios, my business partners and fellow CFPs, Kevin Korhorn and Josh Gregory. So often, what separates those who have financial peace from those who do not isn’t about how much income they earn. It’s their cash flow operating system for you. Is this a source of stability in your finances or is it a source of frustration? We’re helping you implement the three bank account cash flow operating system today. that and more on this episode of the wise money show. I would say that it seems like a myth that people do think no find the the thing that is the separator is how much income you make and certainly you need to make a certain level of income right you’ve got to get past the basic expenses but beyond that or even managing that if it’s tight it’s it’s how you manage your income not how much you have so uh looking forward to getting into that especially this time of year it’s important to dive in and have the right habits if you have a question for the program we’d love to hear from you call or text us 574222000. That’s 574222000 online wisemoneyshow.com is where you can find us. You can leave questions that way as well. Most questions come through social media though and the YouTube channel. So wherever you’re at, we are there as well. Search the wise show. Guys, what’s the number one thing people get wrong when budgeting? Oh, that’s an easy one. They don’t do it. Okay. Because I can I fallacy that nope. I’ve got I’m juggling all of this and it’s it’s working out just fine. I don’t need a a budget. I don’t need to document it. Well, and I’m I’m telling you, I’ve met with lots of folks that are in denial. And they would say, I’ve met with folks who have said, I’ve I’ve seen Dave Ramsey live three times. I’ve read all of his books. I went to Financial Peace University at my church four times. And I’m like, well, tell me about your budget. Well, we you know, we have a budget. Um we and we haven’t committed it to paper or anything. It’s not an Excel spreadsheet, but we know we know like how our budget works. It’s so common. It’s so common and and and that this is not a criticism. So whenever we share I’ve I’ve had phases where I’ve gone in and out of budgeting. This practice I it’s a discipline. It is. Have you ever stuck with a a a health discipline for the long term or an exercise discipline for the long term? Budgeting and your finances, that’s a discipline as well. You’re going to go in waves. Yeah. So this is not a criticism and we and we meet with lots of folks and they are they are very vulnerable and transparent and so we are not airing their dirty laundry. I’m just saying it’s very easy especially with the budget to think oh I’ve got this and a lot of times if you don’t have it or you need help there will be signs some sort of symptoms that say hey I probably need some help getting my budget in order. A lot of times folks can’t do it without some sort of external stimulus, some or something helping them because I can tell you this, if there weren’t a couple of guys showing up in my basement at 6:00 in the morning, I wouldn’t either. You do your budgeting at 6:00 a.m. Doesn’t everyone? Well, I’m sure you do it at 5:30, Mike. Uh, we we Well, you know what Kevin’s referring to is working out. Okay. I I you know the thing that frustrates people or that um knocks them out of the habit of of budgeting makes them feel like see this doesn’t work. Why am I doing this? It’s often something that didn’t get into the budget. Something that wasn’t accounted for that you know you’re going to spend money on when you stop and really analyze it. But maybe you were doing your budget at a time of year where those expenses just weren’t part of your normal cash flow and you sort of forgot about them. And when you get to that season of life or that time of the year and all of a sudden you’ve got expenses that were not accounted for, weren’t planned for, you don’t have the cash for, and they’re trying to squeeze their way in. Not only is that a a potential stressor, it could be a crisis for you that you just don’t have an answer for. And a lot of people get knocked right back off of the budgeting bandwagon um because of those types of events. So that is the question. Is your cash flow operating system, whether it’s formal, whether it’s intentional, or whether it’s just happening, is it a source of frustration for you? Or is it the blocking and tackling in your financial life? You know, know we’re we’re in bowl season, college football bowl season. Is it the blocking and tackling in your life that allows the opportunity for big plays? Yeah. I don’t think the question is, is it a source of frustration for you? Because it’s it it it is a problem if it’s a source of frustration for you. It’s an exponentially bigger problem if it’s a source of frustration for use. Oh yeah. Because because it Why do marriages struggle or have hard times or or sometimes is there even just a lack of intimacy? And I’m saying intimacy as far as just relationship and friendship. And it’s because uh money becomes a presenting problem. And we don’t know uh we don’t know well how to disagree about things and to work through to solutions. And this is the this is can be the the first and and biggest one. Yep. Uh you used a phrase at the start of the show, Kevin, a cash flow operating system. And I love that because a budget is a part of a cash flow operating system. Like it it is the game plan. and it’s how you’re giving every dollar a direction and a job to do and uh you’re you’re laying out the the organization of your cash flow. But what you just hit on is equally important and that is do you have a mechanism maybe even a schedule or a way that you can talk about the budget or the cash flow plan with your spouse? How do you stay on the same page? because man I I sure we have all uh been invited into the conversation for couples where it is a source of conflict and it it’s not only frustrating but it’s like the budget gets weaponized you know like one spouse is like all about making sure that we’re going to be disciplined and we’re going to stay on top of this and the other one is not quite as bought in maybe or not aware. do do you have the spreadsheet on your computer and it’s password protected and your spouse doesn’t even really know what the budget is? So, having a system that that includes a periodic touching base um not too often because if you do it too often you you may get one spouse checking out, but the right amount of frequency of reviewing and adapting the budget over time. That’s part of a cash flow operating system. And typically, you have one of the spouses that’s more interested than the other. And so you have to kind of work on that and and make sure hey we can we can talk about these things and there’s peace and the money is not more important than you my dear. The the budget is not more important than you. the the process is not more important than you cuz really all we’re trying to do this operating system is we’re trying to just you know right now we’re in the process of rehabbing a house and so I think in terms of like financial plumbing and so we have to set up the plumbing cuz once the pipes are set then the water flows where it’s supposed to and it it does make it easier cuz the cuz I want to make it in my financial life there are fewer and fewer decisions to make instead of every month or every paycheck, we have to make all of these decisions and we’re running around the house with a bunch of buckets instead of having indoor plumbing. So, okay. So, Josh, so that Okay, that’s all a fantastic banter and word picture there, Kevin. I completely agree. So, what’s what’s the right operating system? What’s the right cash flow operating system or part of the operating system? Josh, you mentioned a budget. A budget typically just counts for your monthly expenses. And so that’s where I would say most people break down and fail at budgeting is they’re only looking at their monthly expenses. So it feeds right into what you were saying. So the three bank account system, we talk about this often. If it’s the first time you’ve heard about it, well, this is the this is one of the biggest game changers when it comes to creating financial peace and achieving financial goals that you can set up in your financial life. And and I’m if anything, I’m I’m underelling that. You need a structure like this. You need a three bank account system. Now, we’re gonna go out of order. I want to start with bank account number two. And uh because to me, this is this is really what separates Josh, you said one of the biggest mistakes is people don’t account for uh all of their expenses. You know, when we do our budgeting, when a business does their budgeting, they look at each month individually. Okay, what expenses are going to come up in July? What what expenses typically come up in July? All right, what are the different expenses that come up in August? Well, what about September? Oh, we usually get this bill in September. That’s not how you run your personal financial life. That’s not you you’ve got to separate your monthly expenses from your non-monthly expenses. And that’s precisely where bank account number two, we call it delayed spending. That’s where it it solves one of the biggest pain points and frustrations with with budgets. So, being aware, well, what are my monthly expenses? And then what are my non-monthly expenses? Sometimes these are goals connected to a a short-term. Yeah, we’d love to do a home renovation like Kevin mentioned. We’d love to buy new furniture. We I assume we’re going to need new tires. Uh we’d love to go on a vacation. We just, you know, got we’re we’re still in the Christmas season. We’re just past Christmas, but we want to have a less stressful giving Christmas season next year. All of those expenses, some are needs, some are wants, but they’re not monthly. They don’t show up every single month. What’s your game plan to account for those? So, the three bank account systems, specifically bank account number two, we’re helping with that coming up here on the Wise Money Show with Korhorn Financial Group.
Break 1: Hello YouTube. Thanks for being here. This is the Wise Money Show. What you’re watching right now is our weekly 1hour talk show that airs right here on the channel 10 a.m. Eastern time every Saturday morning and also on podcast at the same time and also on a couple local radio stations at the same time as well, which is why the content is broken up the way that it is with segments and long form and so on. We have a lot of other content right here on this channel. Varying lengths, the eight minutes long, six minutes long, 10 minutes long, 12 minutes long, even shorts as well. So, whatever your flavor is, we’ve got it for you. All designed to help you take your next wise step in your financial life. So, make sure you hit that subscribe button, turn on notifications so you’re made aware every time we drop new content. If you like the content, like the content, leave questions as well. We appreciate it. That was too long of me just talking. Sorry. But by the time I took a breath and looked up, it was almost to a break. So, all right, we’ll pick it back up there. Second with bank account number two. Yep. Delayed spending. And then, uh, so let’s explain it and then I’ll ask follow-up questions from there and we’ll all sort of engage. Here we go.
Segment 2: Does your cash flow operating system create peace in your financial life? Does it help you achieve your long-term financial goals, your intermediate financial goals, as well as your short-term financial goals, while also creating contingencies and margin for all the things that aren’t goals, but are surprises are going to come up in your financial life. That’s that’s the system that you need. We’re helping with that right now. This is the Wise Money Show with Korhorn Financial Group. Thanks for being here. My name is Mike Bernard. With me in the KFG studios, Kevin Korhorn and Josh Gregory. Stay up to date on all wise money content. Find us online, wisemoneyshow.com, and then all over social media. Wherever you’re at, we are there as well. Search the Wise Money Show. We’re helping you build out the right cash flow operating system. And a key component of that is a three bank account system. Okay. We’re skipping order here because I think bank account number two is what separates those that have financial stress from those that have financial peace. Josh, explain bank account number two in the three bank account system. Okay. So, bucket number two, bank account number two, whatever you want to call it. We refer to it as the delayed spending account. And um this is where you’re intentionally using a bank account to fund or plan ahead for those lumpsum type of expenses, those periodic expenses that often um come around maybe on a quarterly basis, maybe it’s once a year. Maybe it’s so sporadic that it’s not really predictable when it’s going to occur, but you know it will occur. I’m thinking about things like car repairs or health care expenses. In most years, you’re going to spend some kind of money on these things. And so, the question is, when those expenses arise, when they show up on your doorstep, are you ready for them with cash on hand, ready to spend and not worry? And to me, the the way that you set up bank account number two is actually to play to the strengths of bank account number one. For most people, o over the years as we’ve helped them with budgeting, when we kind of analyze what’s really working well for you in your cash flow, most people don’t have a problem managing their monthly bills, which would be bucket number one, more of a checking account. Um, they know what bills are going to show up all 12 months of the year. They might even be able to give us just off-the cuff a really close estimate on what those bills are going to be because they happen so frequently that they’re they’re just easier to manage. But what about those things that only show up once a year? You know, we’re coming through the holiday season. Christmas is a great example. It’s the same time every year. And yet, a lot of people arrive into the holiday season unprepared for the giving that they really want to do. They don’t have the cash on hand. Well, what if you used a bank account, bucket number two, which is a savings account, to set aside a monthly bite-sized piece of your Christmas spending, for example, the gifts that you and your spouse, you decide, this is what we’re going to give. This is how we want to be generous with family and friends around the holidays. Let’s quantify it. Let’s set a goal for it. And now if let’s say that was uh $1,800 around the the holidays. Well, we can convert that then into a monthly bill just like those monthly bills that you’re so great at managing. What if on a a monthly basis, you set aside $150 per month and it all piled up throughout those 12 months of the year so that by the time we come to holiday season again next year, you have the cash ready to spend at Christmas, guilt-free. It it just adds some fun when you know the money’s there and it’s already been planned. I mean, the word that we’ve used obviously this time of year is is joy. Apparently, I can’t pronounce that very well, but what I’m trying to say is J O Y, which is which is what you want in this season or the season that we just passed now. I now it’s fine. You you can get rid of joy and just go back to bumper to bumper traffic getting mad at everyone. Uh I’m just kidding. Um but so often stressful stress in our finances robs us of that joy during that time because you you didn’t have a great game plan. I’m looking here at a sheet, Josh, that you spearheaded. This is 15 20 years ago. uh the different categories just to get you thinking of the types of expenses that are non-monthly and and if they were just non-monly that’d be super easy. But you said they vary in frequency. Some of these are quarterly, some of these every six months, some of them yearly, some every two years. Some of them you don’t know exactly when they’re going to show up and they’re not but they’re not emergencies. These are things like out-of- pocket medical expenses. So, if you’ve got a deductible, and that would include dental expenses, I care. Uh, could be health insurance, uh, depending health insurance, disability insurance, life insurance, but then homeowners insurance and automobile insurance. Josh, if if you did create this 15, 20 years ago, boy, was homeowners insurance and auto owners insurance much easier back then. We are at a really rough spot right now. And if you’re looking and saying, “Well, gosh, these prices have gone up significantly.” uh I I I I need a way to manage them. Well, are you getting the paid in full discount? If not, recognize that’s not like you can do something about that. You can manage you can have a cash flow operating system that allows you to pay just once a year without ruining your budget and you can get that discount. Um paying quarterly estimated taxes, income taxes, real estate taxes, car repairs, car replacement, clothing, back to school shopping. I have a lot of clients, younger clients that set aside money for a chunk of cash right there for back to school because that’s a stressful time. Education expenses, gifts, holidays, vacations, furniture, replacement, just some fun money. A lot of people use this for going to sporting events. Uh I we want to go see the Cubs a couple times a year. That doesn’t fit in the budget. So, we’re just going to figure out how much would that little trip be and we’re going to set that aside. So, what is that? I think 18 different categories. Yeah, it’s it’s maybe 18 uh different things that you could be setting aside. Again, small dollar amounts each month that are piling up in this delayed spending account, which is a savings account. That that account could have thousands of dollars in it. Yep. Now, that could be tempting when you’ve got thousands of dollars and you’re just feeling like, man, it’s time for a vacation. Let we got to get out of town. We need a break. Let’s go find some sunshine at spring break, whatever. The question, though, is are you rating uh the vacation fund, and maybe it’s only got $1,000 in it, and you’re going to need more than that for your your planned vacation. Are you rating some other account and don’t even realize it? Because, hey, the cash is there. No one would fault you for spending money that you have saved. The issue is and the the potential problem you might create if you don’t have a great game plan in place is you’re spending your car repair fund uh maybe weeks or months before the brakes are about to go out. So the tires are going to go bad. A best practice with this is you know so if you put all of this into one bank account easier to manage okay or easier to contribute to but then you’d have you’d need to have a mechanism of parsing out that bank account. And some banks let you sort of uh create little pockets within that. For me, I set this up a long time ago. Actually, I started using this system when I was saving up for my engagement ring for for for Cindy and we actually just had our 19th wedding anniversary, guys. Congratulations. Like it was yesterday and 19 years ago. Uh, good thing, you know, we’re all staying young and um, but so mine was set up where I actually in my delay in this ex in this category, I have multiple bank accounts that are all nicknamed. So when I log in, I’ve got a car fund. It says car fund. I’ve got a vacation fund. Actually, it says Disney fund. Um, I’ve got a home improvement fund. I’ve got a taxes fund. I’ve got an insurance fund. They’re sort of parsed out. That might be overwhelming to some. It works for me. So, you got to find a way. So, those are separate bank accounts. Those are separate bank accounts that have a that you have different account numbers, but when I log in, all I see is the nickname. Cuz isn’t there a a online money market account where you can actually create the buckets without creating separate accounts? Correct. Which would be easier from a 1099 like tax standpoint for the interest on Yeah. You know, if you love Excel and spreadsheets, you could manage one bank account by slicing and dicing, keeping track of that big account balance. How much of that is earmarked so far for the home repairs and the vacation and the uh the the clothing and so on. So, how do you get started? You know, we’re intentional about when we’re placing this in the calendar. This is right at a time where either you’re feeling a lot of financial stress and maybe you need to adopt this system to to so that you don’t feel this stress a year from now or maybe you’re turning a new page in your finances. Maybe you have an income change coming up but maybe some expenses have crept in as well and you need a plan a cash flow operating system to get over this. So or to manage it. So how do you get started? You first start by going through either that list or creating your own list and figuring out what the annualized amount is that you should set aside in each of those categories. Add it all up and divide it by 12. And then you need to make sure that that number, you just turned it into a monthly number, can fit within your monthly budget, which is immediate spending. We’ll get to that here next. And if you get that to work and sometimes that’s like balancing a broom on the palm of your hand like you used to do before there was internet and like you got to adjust it around a little bit to make sure it all fits. But from there then a best practice to get this started. Get some seed money in there. Find a way to throw $1,000 in there because some of those expenses so basically you’re on a plan that over in in 12 months you’ll be good but some of those expenses will show up in three months or five months or six months and will you be ready? We’ve got a few other best practices with delayed spending and then we’re going to hit immediate spending and then emergency spending. Your three bank account system. We’ve got that more coming up on the wise money show with Korhorn Financial Group.
Break 2: Two in a row where I just talk non-stop for four minutes before we break. We love uh we love hearing it. I I was trying to get a word in edgewise and it didn’t really work. I mean to me the only thing I’d want to say about the delayed spending account is I need a hundred bucks a month if I have a if I’m driving a car. Yeah. I need to put a hundred bucks a month in for my current car and then I need to put a several hundred bucks a month in for my next car. And that Let’s do it on the show. And I think those numbers might be small though. Those have not been adjusted for inflation. And it’s it’s hard to even say this because you just don’t like it. But you you get frustrated that your auto insurance costs so much and your home insurance costs so much. What if those were just percentages really of the value of those things? And the truth is the value of those things has has skyrocketed over the past 5 years and the insurance prices have been delayed because they are reactionary. They don’t those don’t go up until there are claims on those. Those are lagging. That’s right. That’s the better word for it. So So yeah, having having defined numbers, those might need to go up with these values going up. Mhm. All right. Here we go. Third segment. We’ll definitely get into immediate spending here and maybe the last segments on emergency fund. We’ll see. Here we go.
Segment 3: What tools are you using to manage your monthly budget? You it your monthly budget is not adequate in and of itself. It’s got to be part of a three bank account system, a bigger cash flow operating system. But what are the hacks? What are the tools for you to build your budget, to track your budget, to be on the same page with your spouse if you’re married? What are those tips? We’re helping with that right now. This is the Wise Money Show with Korhorn Financial Group. Thanks for being here. My name is Mike Bernard with me in the KFG Studios, Kevin Korhorn and Josh Gregory. Every episode of the Wise Money Shows on podcast, wherever you listen, just search the Wise Money Show, subscribe to it there, rate it there as well. We appreciate that feedback. talking about having the right cash flow operating system. The things that typically commonly trip people up with budgeting, something that people don’t like doing, and guess what? It’s really hard to do as well. So, that that kind of duality right there means most people just don’t budget. No, doing it well, having the right cash flow operating system allows for you to make great progress in your financial life. If you have peace with your day-to-day and it doesn’t feel like one step forward, two steps back, then you have the confidence to save up for your future. You have the confidence to achieve other financial goals. It’s the foundation that the rest of your financial life is built on. We want you to have that clarity, that peace of mind, that success. A lot of it hinges on non-monthly expenses, delayed spending. We’ve talked quite a bit at that. Kevin, get the last word before we talk about immediate spending. Well, I mean, the thing that really jumps out to me is that is thinking about vehicles and vehicle expenses. If you have a car, if you’re driving a car today, you need to be putting $100 a month into your delayed spending account because that’s what it costs to maintain a car. And it it might not cost a 100 bucks this month or next month, but I just put new tires on my vehicle. And um that was about, you know, and I have a bigger vehicle, but that was 20 months of savings, right? Yeah. And so you say, “All right, well, what else do I need to be doing? I need to be putting several hundred a month into my delayed spending account for my next vehicle, car replacement, car replacement, because I want to be working towards becoming the bank instead of needing a bank.” So this is where you win with interest. If you’re getting a car loan, you’re paying interest. If you’re saving up so that you can buy you that your next vehicle with cash, you’re earning interest. Which side of interest do you want to be on? And over time, you you might you might start out thinking there’s no way I’ll ever be able to buy a car with cash. I thought that way. Okay. But over time, working this habit, building this discipline, you can flip the script. You can earn interest instead of paying interest. And I can tell you this, if you’ve got the money set aside for a car, if you’ve been saving it monthly, the longer you can go saving that money monthly, the bigger the the pot of money you have for your next car, and the bigger the pot of money you have, and the more sacrifice that you’re looking back and saying, “Are you kidding me? I’ve I’ve done I I’ve foregone pleasure uh for all of these months, and there’s all this I’m not paying that. I I I watched my son make that exact same calculus in his mind when he was buying his first car. Uh he had saved up enough to get a nicer vehicle, but the thought of parting with all of that sacrificed money, so he scaled back what he he got and uh thankfully he got a car that does not run quite as fast. now. So, so just just like having a great monthly budget, if you don’t have a plan for your non-monthly expenses, then it’s it’s it’s inadequate. Same with having a great plan for your non-monthly expenses, but not having a good monthly budget. Like, you need them both. So, let’s talk about that first bank account, that immediate spending. Well, yeah. Your your cash flow each month um includes not just the monthly bills that show up in your mailbox or online. Uh the the mortgage or the rent, the utilities, the food on the table, stuff that you know you’re going to spend money on every single month. um that can’t eat up all of the income that you have coming in or you are marching towards some sort of a crisis and it’s going to show up in those things that we’ve just mentioned like car repairs or uh a health expense or something like that. And so to discipline yourself to hold your monthly spending down to a level that meets your needs and also achieves the lifestyle that you want while still making room for those non-monthly expenses, those periodic expenses that you’re going to save up for. That’s a discipline, right? Um, and this is one of the primary reasons why we separate your monthly bills from your non-monthly because if you’re trying to save up money uh for your next car, you’re going to do that for a lot of years before it’s time to go write the check and buy a vehicle. Mhm. That’s going to be a lot of money piling up. If you only operated with one bank account and that was a checking account that you also pay your monthly bills and you have your fun and entertainment and everything out of, there’s a very good risk that the the car replacement fund gets eroded over time because you’ve got plenty of cash in your bank account, more than you need at that point because you’re saving up for something longterm, but it’s the shortterm spending that can deplete those uh those resources. So to to me, separating and getting your delayed spending money out of sight, out of mind. It’s not there maybe uh right where it’s looking you in the eyes every time you check your bank balances and everything. Um I I think that’s that’s really important um to to create that separation. What are the tools that you’d recommend someone have for immediate spending? I feel pretty strongly about this. Apps and technology have certainly helped pave the way. This was all Excel back when I started my career. That’s how you built your budget. That’s how you manage your budget with all the fancy apps and you connect it to your bank account and then you can categorize expenses. It does a lot of the work for you. That is super helpful for tracking expenses. I think it’s terrible at creating your budget to begin with. I still recommend creating your first budget in Excel because so often the or or on on paper with with pencil and and paper where you can see here’s the net income that comes in typical typically every single month. And then I like to group expenses. Here are all the fixed expenses that are going to show up the exact same amount every single month. And then here are the here are the ones that we actually have some discretion over. We can choose how much we go out to eat. We can choose, you know, how much we like. These are the variable ones. And you list all of those out there and see if the numbers work. And then if they don’t or the there’s not enough margin or doesn’t fit your delayed spending, you erase some and say, “Well, I guess we we need to spend $50 less in this category or maybe we need to make this adjustment.” Like that that adjusting that visibility. I haven’t found a great budgeting app that’s that clearly spells all that out. The budgeting apps, in my opinion, are fantastic for tracking budgets, not helping you create one from scratch. I agree. And you want to be creating one that is forwardlooking. All of those tracking tools are backwards looking. They tell you what you have been spending. And if life worked perfectly on averages, then maybe it would be a good forecasting tool. But I I’m curious, you know, you were describing sitting down and making sure that the numbers work and if there are areas where you have discretion on your spending, how do you decide whether we’re um spending the the heavier end of that spectrum or the lighter end? That’s got to be conversations, right, between you and and your spouse. That’s why early on in a marriage, I think it’s important for managing the finances together. Um maybe literally paying the bills. So when Andrea and I first got married, we were living in an apartment and every month we would sit down at the the dining room table and um we would get all the bills. They all came paper form at that time and we had a physical checkbook. One of us would write the check, the other one would be filling out the envelope, licking the stamps, whatever. Um and uh getting it all bundled up and ready to go. But the point is we were doing it together. We both had the same visibility. Y that was a very manual process and there are easier ways to get visibility. But visibility on your finances from day to day, month to month is part of that cash flow operating system. If you’ve got a great game plan, you got the right bank accounts in place, but you don’t know what you’re actually spending and you don’t have the ability to adjust, you’re not having regular conversations as a a couple, then there’s some pieces missing in your cash flow operating system. And unfortunately, you’re not going to be successful. I completely agree. You’ve got to get involved. And in technology, it’s a huge help in how easy it is for, you know, swiping plastic or debit cards. It makes your financial life just flow very, very easily. However, it also means so much happens with you just being hands off. And especially when the budget’s tight or when you’re in those formative years or maybe when you are uh dealing with a financial crisis or getting really focused on a financial goal, you need to get involved. Roll your sleeves up, get involved, and look at everything. And so building that budget in Excel, maybe the uh the YAB, you need a budget that that’s still a decent one. based off Excel, but then having a good mechanism to track. I would use an automated uh tool like a quickin or or something like that to uh or every dollar or something like that that tracks it. You’d want to link it to your bank account, but then you got to tune in every single week or at least once a month to see how are we doing? Are we overspending? Do we are are we uh hitting a a ceiling somewhere? So, all right, we’ve got more coming up here on the Wise Money Show with Korhorn Financial Group.
Break 3: Okay, we’re going into 4 seconds worth. So, yeah. I mean, the thing that we didn’t talk about was our Wealth Vision 360 because almost every time as we’re preparing for a client appointment, if they if clients have l linked their bank accounts, you can just peruse and find something that probably needs to be discussed. Let’s I might say that a little bit differently, but I would I don’t know how you’d say that, but I mean that is uh I mean that’s the type of tracking system that you were referring to. Yeah, let’s I was just trying to sneak it in before that wasn’t fully thought out. I yes, we absolutely should mention wealth vision 360 and then we can get into emergency fund and I’m assuming maybe tying it all together there might be space for that. Best practices, stories, whatever. So, let’s hit it for a segment. Here we go. No bonus content. We’re hustling. Here we go.
Segment 4: Are you starting the year with a fully funded emergency fund or is does this need to be one of your financial goals for this year? Hey, first priority is we’ve got to build back our emergency fund. We’re feeling a little bit vulnerable. This should be and could be one of your most important financial goals. We’re helping with that right now. This is the Wise Money Show with Korhorn Financial Group. Thanks for being here. My name is Mike Bernard. With me in the KFG studios, Kevin Korhorn and Josh Gregory. Every episode of the Wise Money Show, as well as a lot of other content, is on the Wise Money YouTube channel. Make sure you go check that out. Go to YouTube, search the Wise Money Show, subscribe to it there, turn on notifications so you’re made aware every time we drop new content. You can leave questions and comments right there as well. We appreciate it. Talking about having the right cash flow operating system, whether you are entering about to enter the new year with a lot of financial confidence or some financial stress, the cash flow operating system is typically what separates those from financial peace from those that don’t. We want you to have the the right system for managing your cash flow so that it’s not a stressor and you can achieve your financial goals. It’s a three bank account system. First bank account, immediate spending. That’s your monthly budget. Managing your monthly expenses, making sure you’ve got the right categories, making sure you’ve got the right margin. Part of that margin then is used to fund bank account number two. That’s managing your non-monthly expenses. All the stuff that’s going to happen, but it doesn’t happen every single month. So, are you prepared financially when those items come up? Bank account number three you’re all familiar with. We’re going to get to that here in just a second. But we’re talking about tracking your immediate spending. And Josh, I’m even gonna tie it back into before we even started recording this episode. You were saying, well, the three bank account system is a cash is part of a cash flow operating system. It’s not the whole thing. And your financial life needs to be all connected on one financial plan, on one financial inventory, if you will. The one that we use at KFG is uh is called WealthVision 360 and it has a budgeting tool within it. Now, again, I I’d rather have you build your budget in Excel. You can very easily make adjustments to it, but tracking it, you’re going tracking your your expenses and making sure that you’re in line with your budget. You’re going to want to use an automated tool. And yeah, our Wealth Vision 360 is is that tool, can be that tool, and makes a lot of things very visible. and then you can collaborate with your CFP on it. Well, if you have a tool like that that is tracking all of your spending from month to month, day to day, whatever, it’s recording the history for you, you still have to have that process of going back and you said kind of checking in um or revisiting the the budget to say, “All right, this was our game plan. What was reality? Where is there a discrepancy? And do we need to adjust our game plan?” Because the reality is man you think back ever since co inflation has been very very real right and it continues to affect I mean it almost seems like it’s going through the economy and waves different categories of spending start skyrocketing and then calm down and then it’s the next thing but the the point is I man if you set a budget three years ago and you’ve just been kind of blindly assuming that that’s still working today. I it it can’t be right. I mean, your expenses are changing. Hopefully, your income is also going up. And so, on a regular basis, you need to be able to go back to a tool like what we use, Wealth Vision 360. It’s what our clients have uh available to them. Check the data and see, well, how does our game plan need to adjust moving forward? Because your financial plan is counting on a good picture of what is your lifestyle. Your lifestyle today is the basis for a picture of what your lifestyle is going to be in retirement. That affects how much you need to be saving for retirement and uh when retirement is going to be affordable for you, that sort of thing. So cash flow doesn’t ma it doesn’t just matter today. It also is a basis for your long-term goals as well. Yeah, that’s right. All right. third bank account then in this three bank account system the emergency fund actually don’t like that term because how frequently but I you know we can’t we can’t change it I think it’s I think that’s the term what would you call it the shock absorber how frequently do emergencies come up the uh the bumper the cushion no it’s financial confidence account and and it’s not that’s I didn’t come up with that but as soon as I heard it I yes absolutely because emergencies especially when you’ve got a well functioning bank account number two. Mhm. Where you’ve anticipated so that getting new tires is not an emergency, right? Or or dealing with a fender bender is not an emergency or we just hit our deductible again and that’s not an emergency. If you don’t have bank account number two, then all those things are going to feel like an emergency. But if you’ve got a bank account number two well executed, you’re going to have very few true financial emergencies. And so they these dollars, your emergency fund quoteunquote can start feeling like lazy dollars. No, they’re there to give you financial confidence. Exactly. So So uh 7 days a week, 365 days a year, you’re getting financial confidence because you have that safety net. And that gives you the courage and the boldness to max out that retirement plan, to save up for that for that, you know, the business that you’re starting or that you want to, you know, the new house that you want. you’ve got the confidence to go after those long-term goals because you know if something happens in the meantime, you’ve got that shock absorber. I I agree completely. You know, the types of things that we would think of as an emergency might be major major health issues that you didn’t see coming. Um although again, you know, you’re going to have health issues. you know, you’re going to go to the doctor or the dentist or whatever, but um if if there’s some that just far exceed what would be normal in a in a given year, you might decide that that’s an emergency that we need to um dip into this bucket number three for major home repairs or major car repairs. Man, we had a stretch there for a little while. We had to put new septic system in. Our septic system was not old. It just failed. like it may have been installed improperly. I I don’t know. But, uh, new septic system, new transmission in a relatively new vehicle, like you don’t expect these things, right? Um, but you want to be prepared for them and have a fallback plan if if unfortunate events were to occur. But the number one um emergency that you you have to be prepared for is an interruption to your income. Yep. This is what can send someone spiraling. Maybe it’s an injury at work. Maybe you’re disabled for a while. Maybe uh for health reasons, you can’t work like you normally would. Maybe your industry experience is a pullback or your employer goes out of business. Something out of your control, unpredictable, it prevents you from earning what you would normally earn. Do you have money to fall back on to keep the family um functioning for a period of time? And that’s why you know often we think of the emergency fund when when you are are thinking about scale or the amount of money you need to have in that account. We always quote it in the form of time. We say 3 to 6 months is sort of a default that a lot of people will use and it just boils down to well how long could we maintain our lifestyle cover the family’s needs if income stopped tomorrow. So you mentioned one of those potential income interruptions would be uh an injury. So do you have disability insurance? So like this is this is why this three bank account system is part of a cash flow operating system because play it out if you have an injury or are disabled and you’re not able to work. Well, if you’ve got clarity on your monthly budget, how much you need to spend. If you’ve got money set aside for known upcoming expenses, so an injury or interruption to your income doesn’t derail those essentially, and then you’ve got 3 to six months of your lifestyle set aside. And then you have disability insurance that maybe kicks in after 90 days or maybe kicks in after 180 days. Then now, is it a financial event? It is. It is. But is it a is it a financial catastrophe? No, because you’ve got a plan, right? And and it all fits together. Weave the same thing instead of, you know, bad news, negative event with positive retirement, right? And planning planning for retirement. You’ve got clarity on your what you spend every single month. That’s a that’s one of the five crucial factors for your retirement plan. You have clarity how much you’re spending. So, you’ve got that visibility. You’ve got a well functioning two bank account system. So, your second bank account is working just fine. And then you’ve got that emergency fund in place so that when it comes to your retirement, you’re saving up everything else for dollars that you’re going to spend out there in the future. This is the operating system that that creates this foundation to your entire financial life. That’s exactly right. You know, what we’ve been talking about this entire show is one of the six areas of your overall financial plan. It’s your present financial position. It’s your day-to-day uh how are we going to meet the family’s needs and hopefully some of the wants as well. How are we going to keep a financially healthy and stable um financial position in place at all times and that is what you build from. That is the foundation that all those fun goals out there in the future uh become achievable because of the the habits and the systems you put in place today. So if this is if if this is hitting you at a time you say you know what I had this discipline and I don’t have it right now. Well, this is encouragement. Get started. Get started today. Don’t don’t wait. And build out that three bank account system. If you’re in a financial crisis, get involved. Roll your sleeves up. Build out this system and let’s get going. If you are unstable financial position, maybe you’ve got kids that need to hear this and and take that their next wise step. So hopefully this helps in all of those situations. That’s all the time we have for today. On behalf of Josh Gregory, Kevin Korhorn, all of us at KFG. Have a great weekend. We’ll see you next Saturday for the Wise Money Show with Korhorn Financial Group. Securities offered through Silver Oak Securities member FINRA/SIPC. Advisory services offered through KFG Wealth Management LLC. Join business as Korhorn Financial Group. KFG Wealth Management LLC and Silver Oak Securities Incorporated companies are unaffiliated.
