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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.