The Dreaded “B” Word

Alright, let me just say it to get it out there so we can all come to an understanding that we are talking about.


Yes, I said it. No, it’s not an evil word. You can put your swear jars away. I warned you in a previous article that I would be talking about this, so let’s just see if we can get through it with as little pain as possible.

Let me propose a business to you and let’s see if you would like to invest in this business. It is a business in which you will generally know what it will earn (it’s not a start-up) but we will pay no attention to what we are spending on behalf of the business. We will simply hope at the end of each year that we earned enough to cover the expenses. But don’t worry, if we spend more than the business earns we will simply borrow money from the banks and we’ll charge that debt to you, the business owner. How does that sound to you? Likely, not very good, right?

No one out there would buy into a business that is run in this fashion. A business (again, not a start-up) usually has a good idea of what its income will be and keeps controls on what it spends. It builds forecasts for both income and expenses and plans ahead for times when it KNOWS large, irregular expenses will be incurred (some flexibility for the unknown is always needed but let’s not get too technical in this example). At the end of that process, the business owners work hard to ensure that the business will earn profits that will be paid out to themselves to provide for their family and their future. This is how every good business is planned.

So why is it that we don’t plan our family finances the same way?

We have an income that is, for the most part, predictable. We know what our expenses are because we have chosen to commit ourselves to those expenses, right? No?! Believe it or not, a large number of families have no idea what their lifestyle costs. We simply go about our lives spending money (usually on credit cards) and hoping at the end of each month that we have enough money to pay for it. If not, we will leave those purchases on our credit cards, move the debt to our line of credit, or every now and then, look for a consolidation loan to group our debts together to make things more manageable. If we would never invest in a business that is run this way then why do we run our households this way?

To create a financial plan (forecasting, just like businesses do) to get you where you want to be in the future, the process has to start with an understanding of where we are today. One of the most critical pieces of that current picture is the “B-word” which is dreaded by millions of families all over the country. Don’t like that word? I don’t either and believe me I am not suggesting that you live on a budget. So instead let’s call it a “cash flow” analysis. Every successful family that I work with has an understanding of what it costs them to live. Until we know that, we cannot begin to forecast what it will cost you to live in the future. Until we know that, we cannot begin to build a financial plan to achieve your goals. Until you know what it costs you to live today, you can’t evaluate how you spend your money and make the call on whether or not changes are necessary (or needed) to help you get where you want to be. That evaluation will be done by you, based on your values, and not based on the expectations of any financial planner or application of some “average” guidelines. Your spending habits are yours and your lifestyle choices are yours. Wouldn’t it be nice to know what they are and know that you will be able to live the way you want to live in the future? To become financially free and be successful at building wealth, it always begins with knowing what it costs. To start that process for yourself, start with a cash flow analysis and find out how you spend your money. If you can figure that out, we can help you to get where you want to be.

Until then, I wish great success to you and your family.

This is a general source of information only. It is not intended to provide personalized tax, legal or investment advice, and is not intended as a solicitation to purchase securities. Michael Larocque is solely responsible for its content. For more information on this topic or any other financial matter, please contact an IG Wealth Management Consultant