DISCLOSURE: In no matter am I associated with “The Money Founder” company or a representative of the company. This is an independent view on the product.
This is 1st article of the 2 on cashflow analysis.
I recently (well, over 4 month ago) attended a workshop from a company called “The Money Founder“. It turned out that I was the only person who was not a financial planner on this workshop. The way I found out about this company was from mortgage broker and financial planner, Michael Hunter.
Here is the little background on the company. The CEO and founder is Stephanie Holmes-Winton. This young lady was a financial planner for quite some time and she created her own system on how to attract customers in her practice. Eventually she decided to leave behind her financial planner career and found The Money Founder company around 2010-2011. The company is trying to archive quite a goal: it decided to create a designation among the financial planners called Certified Cashflow Specialist or CCS. And this designation is trying to archive a very important goal for financial planners: often when a financial planner is offering a product to the family -> the family members often are concerned of where the money will come from or how do they pay for that product. The CSS financial planner will create a cashflow analysis of the family profile and show where exactly the money will come from. So the CSS certification become the foundation stone of the practice for financial planner and it answers the most important question: does the family has ability to buy something and if the financial planner will be paid.
Today, I will talk about the company a bit and what do you expect to get if you ever decide to get a cashflow analysis plan.
CEO, Stephanie Holmes-Winton
Stephanie has a very special gift. She can probably sell ice cubes and snow in Antarctica and salt water to Easter Island habitats. She sold her financial planner practice and founded the company. Essentially what she did was moved from B2C model to B2B model (B2C is business to Customers, B2B is Business to Business). If you know anything about marketing -> selling to B2B is a lot easier since all you have to show is if you buy this tool and apply it properly -> you will make more money -> Business-minded people get it very well and purchase it at much higher conversion rates. B2B is a lot smaller in market share compared to B2C but overall B2B is a lot more controlled way of delivering the product. She wrote 2 books when she started the company:
- Diffusing the Debt Bomb, a handbook to help financial advisers learn to help their clients tackle the very real challenges that debt and cash flow bring to today’s client.
- $pent , designed to help you understand how your personality affects your current financial situation. This book reveals how we all make money-related decisions based on our personality traits. Full of non-judgmental advice, $pent is geared to specific personalities and shows you how to use your personality strengths to increase your cash flow and reduce debt.
I find Stephanie’s approach similar to what Robert Kyosaki did back in the day. He wrote “Rich Dad, Poor Dad” to create a distribution channel for his main products: Seminars and Cashflow games. Stephanie wrote the “Diffusing the Debt Bomb” to attract her main clients: financial advisers. The book $pent more reminds me of “Sales Dogs” style by Blair Singer in Rich Dad serious. $pent identifies specific mindsets of people based on how they deal with money:
- The Dreamer
- The Justifier
- The Brick Wall
- The Poly Anna
- The Masquerader
- The Undercover Agent
- The Bunker
There is a test to find out which type you are: The Money Finder Test. Also you can read the chapter 2 of the book “$pent” to be found on the The Money Finder website.
Company, The Money Finder
Most likely if you are customer trying to find anything about the company -> you won’t find a lot. The target area is financial planners and all marketing materials are focused on selling the certification CCS to financial planners. I will write about what a typical financial planner will get from CSS certification in 2nd article.
I will start with most important: Is it worth it?
I have an unbiased opinion on this since I am not related to the company. In my opinion, for general public this is a very good idea. If you are more or less financially profound -> most likely you have something similar in place. The ideas behind the plan is very solid and simple.
What is the main Idea?
The idea is to identify the free cashflow of a family without changing their spending habits. At the same time to push a spending cap on variable spending that typically gets people to way overspend. Underneath there will be some physiological things occurring that will actually increase that free flowing cashflow.
Second most important question: The cost. I will not reveal the cost of the Cashflow Analysis for simply 3 reasons:
- Each Financial Planner determines the price of the Cashflow Analysis
- If you are reading this article because you believe that the cost is too much: the plan is either not for you or the financial planner did not explain it well enough
- Price models will change and hence this article will be outdated if the price model changes
What do you get from cashflow analysis from a CCS financial Planner. Here are the overall process.
You fill out a 3-page spreadsheet of your financial situation called “Client Information Form” most likely in a PDF form or online. It is split in couple of section of income, debt, expenses and assets.
Why are you doing it? Couple of reasons:
1. Financial planner needs a base line to start.
2. Trust issues: if you don’t disclose this info in full view, can a financial planner really do anything about your financials?
3. Filter: people who are not going to do it will not bother the financial planner anymore
4. Legal requirement: to satisfy some regulatory things
5. Screening process: within 10 minutes of looking at your application a CCS planner can make a decision if the plan is right for you or it simply won’t make any scene. If the process won’t work for you, financial planner
You probably will be asked to do The Money Finder Test as well.
Issues with this step: the way you fill out your financial information will really effect the cashflow plan provided. What I mean is that if you provide wrong information to the financial planner -> you will get wrong results in the plan/wrong anticipations/etc. Once you start the plan -> everything will come into place more or less.
Step 2 -> you don’t see it, but this will occur
CCS adviser will input all of your data into proprietary software. CCS gives very good training on how to generate lots of options on how to help you improve your cashflow. It also gives a good idea how accurate you filled out this form (example: if you have very low expenses but overall you have a 60K+ consumer debt -> most likely you under estimating your expenses). Eventually what he is determining are 3 numbers: working cashflow, active cashflow and the gap.
What is working cashflow and active cashflow? Well, this is term that Stephanie made up to get away from the variable/fixed terminology. The definition is different but there are a lot of similarities.
Working cashflow: it covers the basic necessaries. Important attribute: the expenses dont’ very change too much from month to month. Another big attribute: it really works very well for automatic withdrawal. Big difference between fixed expenses: gas and transportation cost would be considered variable expenses. But in working cashflow it will be considered working cashflow. You still need to spent on transportation no matter what happens and it typically be the same each month. You can’t reduce it to NIL is what the idea is. And you typically can’t reduce them too much without changing substantially your life.
Active cashflow: Main attribute – it can significantly vary based on your current emotional feelings. Let’s take the gas example again. It is highly unexpected that because you will be feeling bad, you will go and add $300 worth of gas into your car. On the other hand, you can go and say to your self that because you feel moddy, you deserve to go for that expensive lunch with colleges, buy some stuff from Ebay or just spend X amount of dollars in the evening in the shopping mall. It covers non-essential stuff or things that can vary dramatically. Clothing is a great example. You can spend $1000 a month and nothing on the next month and you might buy cloth not because you need it but because you need an emotional uplift.
GAP: the most important number. GAP – ACTIVE CASHFLOW = INCOME – WORKING CASHFLOW
Gap essentially identifies the amount of money that you have every month to spend on your life(active cashflow) and saving/investing or buy financial products. This is where the term money finder comes from -> it find how much per month of free cashflow does a family has.
Each family might have some type of expenses assigned to working instead of active cashflow however it would be more of an exception. Example: Fitness club membership, if the family is health freaks -> the fitness membership is a must and will be assigned to working cashflow. Another examples are pets: dog owners feel that all those expensive specialty foods are non-negotiable. CCS training will give tools for the adviser to detect such cases.
Step 3 -> review with you
At this point the adviser needs to sit with you and explain what the plan can do for you without reviewing any significant details. If the adviser charges for plan -> this is where he will present that this is what it will cost and these are the benefits.
Most likely if you found this article on the internet -> you really wonder what happens next if you choose to buy this plan. I will try to explain in general terms.
Typically is Working Cashflow takes over 75-80% of your income and there is no substantial way to reduce the financial obligation -> typically the financial planner most likely won’t give you any plan since the GAP number will be very low.
Typically GAP number will represent around 10-30% of your overall income. Here is what my numbers looked liked:
Working cashflow: 53.10%
Active cashflow: 28.53%
The first major thing that financial adviser will do if you have a big consumer debt: finance your mortgage.
What is the logic behind it?
Reason is to reduce the working cashflow number to as low as possible. Refinancing will most likely done with Manulife Financial as Manulife One Product. Pretty much any HELOC product will do but Manulife One probably works very well.
Second major thing: your bank account will be suggested to be changed around in the following way. Most of your banking will be consolidated.
Income: your paycheck will go into one of the Manulife One bank accounts. Let’s call it INCOME Account. This is a good thing. I talk a lot about Tax-Decuctable mortgage and it uses the same concept.
Expenses for working cashflow: they will be directly deducted against the INCOME account
Expenses for active cashflow: every week a fixed amount would be transferred from the INCOME account to another Manulife One bank account. Let’s call it SPENDING account. The SPENDING account will become your primary chequing account on your debit card from Manulife Financial.
Credit cards: most likely you would be discourage to use them and reduce them to 1 or 2
Other debit cards: most likely you would be discourage to use them and just close them.
What is the logic behind it?
1) Consolidation of banking actually makes life easier
2) If you have less bank accounts -> you don’t make those bank fees
3) Simpler finances are easier to comprehend for day-to-day operations
4) Physiologic reason: the reason why SPENDING account get updated every week is because typically person can foresee the expenses only 1 week in advance
5) Spending control reason: if you have limits amounts on debit card and you come to the store to buy something that you don’t want -> you will think twice before proceeding, maybe your debit bank account won’t have the whole about to buy that dress.
6) Spending control reason: stop using credit cards to increase possible spending or increase consumer debt.
Let’s say that you want to go on vacation and you don’t have the money in the SPENDING account -> you can’t go on vacation?
Of course not -> you can go online and transfer the money from INCOME account to SPENDING account any time. You also have that last credit card since majority of the online purchases will only access credit cards. But stats show that if a person has decided to stick to a financial plan -> he probably won’t do such a fooling action.
You have to understand: things that this system is suggesting you to do is for your own benefit to reduce unnecessary spending or to have controls on your spending. If don’t want to implement it -> that is your choice, however at least try.
As you progress in this plan -> you will make some adjustment. Plan is there to help you. Whether or not you take it -> it is your choice.
Once you implement the plan and you work with it for 3-6, maybe 1 year. Then you will have that extra cash in saving sitting up. The idea behind CSS is that if financial planner was able to implement a very good option for family to plan -> they will very likely to trust him to manage their investments as well.
Why does the plan work?
It works for many reasons and I can tell that unless you do completely opposite of what the plan will tell you -> it will work for you. I don’t necessary advise you to purchase the plan. I did not purchase nor do I have intentions. Instead I went to one of the workshops held by “The Money Finder”, understood the principles of the system, created my own mini plan and I can see the results in weeks after my own implementation. I don’t recommended on doing anything like that but if you understand the concept of this plan -> it is gold for life for your financial plan.