Cash Flow Management. What To Know and How Can It Help You?

If you ever google financial planning, there is no doubt that you will quickly come across the idea of budgeting. At Creekmur Wealth Advisors we prefer to focus less on budgeting and lean more into cash flow management as a foundation for beginning your financial journey.

A common question I receive as a wealth advisor is, "What investments someone can make to get a big return?"

While Creekmur Wealth Advisors spends a substantial amount of time researching, modeling, and planning investment strategies we do not believe that rate of return is the most important rate to focus on when it comes to investing. We do appreciate seeing a high rate of return and strive to achieve that.

However, the most important rate I would encourage clients to focus on and monitor is their savings rate since it is totally under the investors control and is the largest contributor to your final net worth.

Your savings rate is calculated by taking the total amount of your annual savings and dividing it by your gross or net income. I prefer using gross income as this encourages us to find tax-efficient methods of savings to maximize our savings rate.

Why is the Stock Market increasing in the midst of such uncertainty?

This year has been quite the ride in markets both domestic and global. Here in the U.S. we have experienced the quickest slide into a bear market in history, followed by an equally incredible market bounce in short order:

What steps might help you sustain and grow your retirement savings?

“What is your greatest retirement fear?” If you ask any group of retirees and pre-retirees this question, “outliving my money” will likely be one of the top answers. In fact, 51% of investors surveyed for a 2019 AIG retirement study ranked outliving their money as their top anxiety.¹

Retirees face greater “longevity risk” today.The Census Bureau says that Americans typically retire around age 63. Social Security projects that today’s 63-year-olds will live into their mid-eighties, on average. This is a mean life expectancy, so while some of these seniors may pass away earlier, others may live past 90 or 100.^2,3

When did you first notice that something unprecedented was occurring with the Covid-19 virus?

I currently live in Washington D.C. and up until last week there were no noticeable differences in day to day life. However, I recognized the unusual nature of this situation last week when I headed down to Trader Joe’s to stock up on groceries for the next few weeks. Millennial that I am, I thought that if I got to Trader Joe’s 5 minutes before the doors opened at 8:00 AM that I would have the place to myself – I couldn’t have been more wrong.

Steps to get your credit rating back toward 720.

We all know the value of a good credit score. We all try to maintain one. Sometimes, though, life throws us a financial curveball and that score declines. What steps can we take to repair it?

Reduce your credit utilization ratio. Your credit utilization ratio (CUR) is the percentage of a credit card’s debt limit you have used up. Simply stated, if you have a credit card with a limit of $1,500 and you have $1,300 borrowed on it right now, the CUR for that card is 87%. Carrying lower balances on your credit cards tilts the CUR in your favor and promotes a better credit score.1

What do you do with big money?

Getting rich quick can be liberating, but it can also be frustrating. Sudden wealth can help you address retirement saving or college funding anxieties, and it may also allow you to live and work on your terms. On the other hand, you’ll pay more taxes, attract more attention, and maybe even contend with jealousy or envy. You may also deal with grief or stress, as a lump sum may be linked to a death, a divorce, or a pension payout decision.

Some specifics about the "second act."

Does your vision of retirement align with the facts? Here are some noteworthy financial and lifestyle facts about life after 50 that might surprise you. 

Up to 85% of a retiree’s Social Security income can be taxed. Some retirees are taken aback when they discover this. In addition to the Internal Revenue Service, 13 states currently levy taxes on some or all Social Security retirement benefits: Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, North Dakota, Rhode Island, Utah, Vermont, and West Virginia. (West Virginia, incidentally, is phasing out such taxation.)¹

How healthy a retirement do you think you will have? If you can stay activeas a seniorand curb or avoid certain habits, you could potentially reduceonetype of retirement expense.

Each year, Fidelity Investments presents an analysisof retiree health care costs. In 2019, Fidelity projected that the average 65-year-old couple would spend around $285,000 on health care during retirement, including about $11,000 in the first year. Both projections took Medicare benefits into account.^1,2