Cash seems so slippery these days. Didn't you just put a $20 bill in your wallet yesterday and now it is gone? Well, that's not a new phenomenon. The Bible says money takes wings like an eagle and flies away (Prov. 23:5)!

Everyone is- or should be - concerned about controlling his or her cash. It is one thing to have a budget and make a financial plan. It is quite another to control the actual cash flow so that one actually ends up accomplishing that plan. The only way to accomplish your long-term goals is to generate a cash flow margin - and that only comes through spending less than you earn.

Although it is difficult to control cash flow, it is not impossible. The process can be broken down to a few essential items.

The objectives of establishing and maintaining a cash flow system are:

1. To allocate funds to meet expenses at predetermined levels.

2. To know one's cash at all times relative to the predetermined level of spending.

To meet these objectives the control system one establishes should have the same effect as an envelope system. As a matter of fact, the use of envelopes is not a bad way to implement a cash flow system until the habit is established. Even though you may be giving up some interest earnings on your cash by having it sit around in envelopes, the lost interest cost is far less than the overspending that would occur without the controls.

In the envelope system, if you put $100 into an envelope for food, then a level of spending has been established. As money is spent from the envelope, the cash balance relative to the established level of $100 is determined simply by looking into the envelope to see how much is there.

In today's environment, however, it is often inconvenient or unwise to keep envelopes with cash lying around the house. Therefore, the budget system should be adapted to work with a checking and savings account. You can use a checkbook-type ledger (the kind used in wallet-size checkbooks) as envelopes. These are available through banks. As an alternative, a sheet of paper could be used as long as it has columns for showing dates, purposes, deposits, withdrawals, and balances just as a checkbook ledger does. Each checkbook ledger has the same effect as an envelope in the budget system.

Before one sets out to implement a cash flow control system, he must be committed to exercise discipline and not to spend beyond his designated amounts. The following principles should then be incorporated into your cash control system:

1. Always measure actual spending against planned spending. The key is to know as soon as possible when budget limits have been reached.

2. Exercise discipline. Is a budget extra work? You bet it is. However, the benefits are more than worth the effort. Even so, once the budget is established, it should not require more than 20-30 minutes per month.

3. Do not use credit cards, except as a "check" (a debit card). Nothing will destroy a budget faster than having to meet unexpected debt payments. Debit card use requires a timely accounting within the budget.

4. Make sure each portion of the budget has a zero balance at the end of the month. All funds not used during the month should be transferred to savings. If spending is done on an average basis, then it will be necessary during some months to transfer from savings back into the budget.

5. Be flexible. At times, it may be necessary to use funds allocated for one purpose for another purpose. This is allowable but will require a specific decision each time a transfer is made. For example, one may decide to give up entertainment money to buy clothes. The budget will allow this to be done in a visible manner.

These principles will enable you to get a handle on your cash flow. And unless you accomplish that, you may never see your financial plan come to fruition.


The National Planning Group of Ronald Blue & Co. is a unique division within RB&Co. that serves the everyday steward - For more information you can visit their website:  www.everydaysteward.com.