If money issues are a recurring theme, follow these actionable steps to reduce stress and end the more month than money dilemma.

I find it puzzling when people who chronically experience the more month than money dilemma say “Money is not important to me. Life experiences are important to me.”

Another quote some may use is “Money is the root of all evil.” If you are talking about truly nasty people who have no moral compass, this may be true. For those who are not nasty, however, I think “the lack of money is the root of all evil”.

The vast majority of the population in North America has significant debt and they frequently operate on a shoestring or in a deficit. When you are in this financial predicament it is only reasonable to expect that your stress levels will be elevated.

The proliferation of payday lending operations is a tell-tale sign that many people have exhausted conventional methods of borrowing. Have you ever investigated the rates they charge on payday loans or installment loans? I mean really, who would even consider paying these rates?

One British based payday loan company which offers "short-term, high-cost credit" with interest rates which can equate to an annual percentage rate (APR) of 1509%, expanded into Canada in 2012; they exited the Canadian market May 6, 2016. Now this company had it down pat. They invented fully automated risk processing technology to provide short-term, unsecured personal loans online, including via tablet and mobile app. Imagine that, you could worsen you financial position without even leaving the comfort of your home.

7 Common Denominators To Build Wealth

In a study conducted over the course of twenty years, Dr. Thomas J. Stanley and Dr. William D. Danko discovered seven common denominators among those who successfully build wealth. Their findings are encapsulated in their late 1990s book entitled The Millionaire Next Door – The Surprising Secrets of America’s Wealthy. The seven common denominators are:

  1. They live well below their means.
  2. They allocate their time, energy, and money efficiently, in ways conducive to building wealth.
  3. They believe that financial independence is more important than displaying high social status.
  4. Their parents did not provide economic outpatient care.
  5. Their adult children are economically self-sufficient.
  6. They are proficient in targeting market opportunities.
  7. They chose the right occupation.

Well isn’t that interesting. The first common denominator among those who successfully build wealth is to live below your means.

Now if you find that you are one of these individuals struggling from a cash flow perspective and you want the treadmill to stop, it is going to take some work. Your cash flow problem will likely not get resolved immediately but chances are you didn’t immediately end up with a cash flow problem. It likely took time to snowball.

End the More Money Than Month Dilemma Game Plan

In order to fix the problem you need a starting point and a game plan. Here is what I propose.

  • Select the appropriate link below and to download the Excel file. These files have been created for Canadian and US residents. You can, however, easily modify these files to suit your requirements if you reside in another country.

CDN Monthly Cashflow Worksheet

USD Monthly Cashflow Worksheet

  • The spreadsheets capture the majority of potential personal expenses. I recognize, however, that circumstances are such that you may need to insert additional rows. If such is the case, make sure the rudimentary Excel formulas are amended to capture the extra rows you are creating.
  • If there are several rows within the spreadsheets provided which you do not require (eg. you only have fewer than 4 vehicles or you have fewer than eight rental properties), do not delete the rows. Rather, hide these rows so you do not affect the formulas (move your cursor to the far left of each worksheet where the rows are numbered, right click your mouse, and select hide).
  • Retrieve all your bank statements and bills for the last 6 months. I recognize the conventional practice is to analyze 3 months’ activity but I suggest 6 months to get a more comprehensive picture. Please be sure to retrieve the bank statements and bills that have been sent to you that you have not opened or have hidden.
  • Record all historical expenses in the appropriate monthly column on the Historical Spend Analysis worksheet.
  • You will note there are two line items under “Sundry Expense” labeled “Coffee - individual #1” and “Coffee - individual #2”; we consume enough coffee that we created separate line items for this specific expense (what were once vices are now habits). If you wish to rename these line items, or any other line items, make the changes on the “Historical Spend Analysis” worksheet. Your new label will transpose to the other two worksheets.
  • Some payments are made less frequently than monthly. If, for example, you are creating this spreadsheet in April but you have an insurance premium that is paid annually in November, you could take your annual payment and spread it over 12 months. If you do not do this, your 6 month historical income/expense analysis will underestimate your annual expenses.
  • As with the case of the insurance premiums paid less frequently than monthly, you need to take into account lump sum investment related contributions as well as irregular income flows.
    Once you have completed your historical spend analysis enter your projected expenses for the next several months on the Projected Monthly Expenses worksheet.
  • At the end of each calendar month, tabulate ALL the actual expenses you have incurred. Be sure to do this as close to month end as possible. Input your expenses in the cells for the appropriate month within the “Actual Monthly Spend and Variance worksheet”.
  • While there is a line item labelled “Miscellaneous” under Sundry Expenses, you should try to minimize the dollar value input in these cells; do your utmost to allocate your expenses appropriately.
  • As you start to input your actual expenses you will see the cells labelled “Variance in (Month)” will start to reflect the difference between what you projected would be your spend and your actual spend. Spending patterns should start to emerge thus allowing you to identify expenses that can be eliminated, significantly reduced, or redistributed.

Final Thought

I recognize there are circumstances where all the budgeting you do will not solve your cash flow problem (eg. job loss, health issues, significant life changes, etc.). In these cases proper professional help might be required. Your initial meeting with a professional will be much more productive, however, if you complete this analysis beforehand. If anything, the completion of this analysis will demonstrate that you have identified a problem and are serious about rectifying it.