{"id":608,"date":"2013-06-03T14:30:55","date_gmt":"2013-06-03T18:30:55","guid":{"rendered":"https:\/\/www.cashflownavigator.com\/blog\/?p=608"},"modified":"2018-08-13T19:29:19","modified_gmt":"2018-08-13T23:29:19","slug":"cash-flow-management-advice-from-ben-franklin-part-1-prepare-for-the-worst","status":"publish","type":"post","link":"https:\/\/www.cashflownavigator.com\/blog\/2013\/06\/cash-flow-management-advice-from-ben-franklin-part-1-prepare-for-the-worst\/","title":{"rendered":"Cash Flow Management Advice from Ben Franklin: Prepare for the Worst"},"content":{"rendered":"

Way back in the \u201860s the TV show \u201cBewitched\u201d was mandatory viewing for baby boomers like me. \u00a0After all, how could you resist a series that regularly showcased the latest model sports cars (Chevrolet sponsored the show), driven by two completely different looking husbands with the same name, \u00a0while also featuring guest appearances by Napoleon, Willie Mays (who we learn is actually a warlock) and, in one of my favorite episodes, Benjamin Franklin?<\/p>\n

In the Ben Franklin episode a well-intentioned but absent-minded Aunt Clara tries to fix Samantha\u2019s broken lamp but bungles the spell and instead delivers Mr. Franklin to the Stevens household.\u00a0 Then, in an ill-advised move, Sam escorts their guest on a tour of the town.\u00a0 Ben is arrested \u2013 for attempting to steal a fire engine.\u00a0 Yes, that was TV in the 1960s.<\/p>\n

But as silly as the plots were, occasionally there were pearls of wisdom in the dialogue.\u00a0 For example, as he was preparing his legal defense Ben Franklin offered a perspective on setting expectations that has stayed with me ever since.\u00a0 Here\u2019s what he said:\u00a0 \u201cOptimists believe that all will turn out for the best.\u00a0 I on the other hand prepare myself for the worst.\u00a0 Should it not occur I am delightfully surprised.\u201d*<\/p>\n

Expect \u2013 and plan for \u2013 unexpected monthly<\/b><\/p>\n

and long-term cash flow shortfalls.<\/b><\/p>\n

This advice might not apply to all things but I\u2019ve found it very helpful when managing cash flow, particularly in the current economic environment.\u00a0 Another way to look at it is to expect \u2013 and plan for \u2013 the unexpected.\u00a0\u00a0 Here are some typical sources of both short-term and long-term cash flow shortfalls.\u00a0 (The larger and more dangerous long-term cash flow risks are shown in red<\/span><\/strong> with an exclamation point.)<\/p>\n

Interruptions to INCOME<\/b>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Unplanned EXPENSES<\/b><\/p>\n

Job-related<\/span>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Job-related<\/span><\/p>\n

. No raise in salary, no bonus\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 . Increased health care costs<\/p>\n

. Reductions to employer savings\/retirement account \u00a0 \u00a0 \u00a0 \u00a0 \u00a0.\u00a0 Increases in other employee benefit costs<\/p>\n

!<\/b>\u00a0<\/span> Loss of job<\/b>\u00a0<\/span>\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0!\u00a0 Income tax balance due<\/b><\/span><\/p>\n

Housing<\/span>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Housing<\/span><\/p>\n

! Tenant vacancies in rental properties (plan on 20%)<\/b>\u00a0<\/span> \u00a0 \u00a0 \u00a0 .\u00a0 Increased property taxes and insurance<\/p>\n

!<\/b>\u00a0 <\/span>Home repairs\/improvements \u00a0 \u00a0\u00a0<\/span>\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0<\/b><\/p>\n

<\/b>.\u00a0 Utility price increases (heat, water, electric)<\/p>\n

Supplemental Income<\/span><\/p>\n

.\u00a0 Changes to alimony, child support or othersupport payments<\/p>\n

Transportation<\/span>\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 .<\/span><\/p>\n

.\u00a0 Public transportation price increases \u00a0 \u00a0 \u00a0\u00a0 .<\/span><\/p>\n

! <\/b>\u00a0Vehicle repairs or replacement \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0\u00a0.<\/span><\/b><\/span><\/p>\n

Communication<\/span>\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0\u00a0 .<\/span><\/p>\n

.\u00a0 Computer repairs or replacement \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 .<\/span><\/p>\n

. Cell phone expenses \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0.<\/span><\/p>\n

Medical<\/span>\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 .<\/span><\/p>\n

!\u00a0 Unanticipated medical expenses \u00a0 \u00a0 \u00a0 \u00a0 \u00a0.<\/span><\/b><\/span><\/p>\n

 <\/p>\n

You might ask, \u201cWhy should I even estimate my short term, or monthly, cash flow?\u201d\u00a0 Because your monthly cash flow is your budget. \u00a0It\u2019s your number.<\/i> \u00a0If you don\u2019t already know it, it\u2019s important that you learn it now.\u00a0 Not only does it define how much you can currently afford to save each month (if any), it also helps you determine what your monthly living expenses will be during retirement.<\/p>\n

To help you measure and manage your monthly cash flow, we created the 80\/20 Worksheet\u2122.\u00a0 If you haven\u2019t already done so, just visit the Cashflownavigator website to fill it in.\u00a0 It\u2019s quick and easy \u2013 and free.\u00a0 But when doing so, follow Ben Franklin\u2019s advice and be sure to build in a cushion.\u00a0 Better to be pleasantly surprised at the end of the month than to find yourself scrambling to cover a cash flow shortfall.<\/p>\n

Larger, long-term cash flow disruptions pose an even greater risk to your financial security.\u00a0 If you\u2019re unprepared for them, you put at risk the achievement of your ultimate goal, financial independence.\u00a0 Fortunately, you can build a cushion to offset this risk as well, by always keeping at least 6 months of living expenses (6 times your monthly \u201cnumber\u201d) in savings.<\/p>\n

As much as we might hope<\/i> that our household\u2019s income will be uninterrupted, and that we won\u2019t incur unplanned expenses, hope sometimes must give way to reality.\u00a0 Unexpected things do happen.\u00a0 Be sure to prepare for them by following the advice of founding father, inventor, and cash flow philosopher Ben Franklin: \u00a0Prepare yourself for the worst.\u00a0\u00a0 If it doesn\u2019t happen, at least you\u2019ll be pleasantly surprised with a cash flow surplus.<\/p>\n

In Part 2 of this series, Cashflownavigator\u2019s roving reporter C. Florence Gaynor (C. Flo for short) tracks down Ben Franklin in person \u2013 or at least virtually \u2013 for an exclusive interview in which he shares additional insights and advice on maximizing your cash flow.<\/p>\n

 <\/p>\n

*\u201dBewitched,\u201d season 3 episode 13, December 1966.\u00a0 Screen Gems Corporation.<\/p>\n

\u00a0<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Way back in the \u201860s the TV show \u201cBewitched\u201d was mandatory viewing for baby boomers like me. \u00a0After all, how could you resist a series that regularly showcased the latest model sports cars (Chevrolet sponsored the show), driven by two completely different looking husbands with the same name, \u00a0while also featuring guest appearances by Napoleon, […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[10,9,45,18,20,17,16,3,13,11,8,7,12,14,46,21],"tags":[27,24,92,53,35,71,40,25,23,73,22,29,91,28,4,26,75,74,6,48,33,47,51],"class_list":["post-608","post","type-post","status-publish","format-standard","hentry","category-assets","category-cash-flow","category-debt-2","category-debt-accumulation","category-debt-reduction","category-financial-independence","category-financial-life-cycle","category-financial-planning","category-investments","category-liabilities","category-net-worth","category-retirement","category-savings","category-taxes","category-wealth","category-wealth-accumulation","tag-assets-2","tag-cash-flow-2","tag-cash-flow-navigator","tag-cashflownavigator","tag-complete-financial-independence","tag-daily-living-expenses","tag-debt","tag-financial-independence-2","tag-financial-life-cycle-2","tag-financial-management","tag-financial-planning-2","tag-income","tag-keith-whelan","tag-liabilities-2","tag-manage-your-finances","tag-net-worth-2","tag-plan","tag-retirement-2","tag-retirement-goal","tag-wealth-2","tag-wealth-accumulation-2","tag-wealth-and-cash-flow-millionaire-next-door","tag-wealthy"],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.cashflownavigator.com\/blog\/wp-json\/wp\/v2\/posts\/608","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.cashflownavigator.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.cashflownavigator.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.cashflownavigator.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.cashflownavigator.com\/blog\/wp-json\/wp\/v2\/comments?post=608"}],"version-history":[{"count":40,"href":"https:\/\/www.cashflownavigator.com\/blog\/wp-json\/wp\/v2\/posts\/608\/revisions"}],"predecessor-version":[{"id":946,"href":"https:\/\/www.cashflownavigator.com\/blog\/wp-json\/wp\/v2\/posts\/608\/revisions\/946"}],"wp:attachment":[{"href":"https:\/\/www.cashflownavigator.com\/blog\/wp-json\/wp\/v2\/media?parent=608"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.cashflownavigator.com\/blog\/wp-json\/wp\/v2\/categories?post=608"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.cashflownavigator.com\/blog\/wp-json\/wp\/v2\/tags?post=608"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}