It’s Not the Cash, It’s the Flow

Author’s husband here, guest-posting.

After broadcasting this blog’s existence to some friends and relatives, Sara received some concerned e-mails about our solvency. So listen up: I am the keeper of the books, and I say we are OK.

To clarify: We are not broke. We are not avoiding calls from creditors. We are not staring at a stack of bills and casting worried looks at each other. True, we have not been rigorous financial planners. But we’ve made good decisions along the way. Our retirement savings is far above average for our age group. (It would still be above average if we were in our 50s.) We own one vehicle outright and will own the other in four months. Our mortgage is conventional and perfectly comfortable, even with a home equity loan we acquired in 2006 to make much-needed improvements.

So why are we overdrafting on occasion?

1. Cash flow is a constant problem. Sara is a freelance writer. She loves it, she’s good at it, and I can’t see her doing anything else. That’s the upside. The downside is irregular pay. Most people (like me) get a paycheck every two weeks. Freelancers don’t. They get a little check here, a big check there… sometimes nothing for weeks. Payment schedules are erratic. (We’re still waiting on a check for work done in February, for example.) Sara books a base level of work per month, but that doesn’t translate to steady income. Month-to-month, we don’t know how much we will earn and we don’t know when it will arrive.

(Wife’s butt-insky comment: I always look at past performance as a barometer of when an account will actually pay, and if it’s a new client, I allow at least six to eight weeks. This is probably no different from many a small business out there. Accounts receivable can be a bitch.)

2. Savings is hard to build up. I’m talking about non-retirement liquidity here. If we had a cushion in savings, a freelancer’s pay schedule would be easier to handle. But we used up that cushion (it was there, I swear) with kid number one. When kid number two was on the way, we had a smaller cushion. We were planning to move, and expected to build up our savings with some profit from the sale. Then we didn’t move. At the same time, the down economy took larger and larger bites out of my annual bonus, which represented nearly 20% of my gross income just five years ago. That bonus was a regular debt-eraser/savings booster, and we’re feeling the effects of its decline. By the time kid number two was nine months old, the cushion was gone.

To reiterate: we are OK. The whole point of this exercise, however, is to become better than OK.

(Wife’s butt-insky comment #2: Way better! I pulled about 6 weeks of receipts from my purse today and thought I saw many items, of supposedly very necessary things, that we can cut. That is a real-world exercise for this week, and I’m actually very nervous about it!)

(Wife’s butt-insky comment #3: I have no idea why the font is wigging out here, nor can I seem to fix it.)