Wednesday, 23 January 2019

How Dan Manages His Cash Flow

It took me a while to realise that psychology is most important when it comes to wealth creation. So much for fancy excel spreadsheets, complicated models with discounted cash flows and, dare I say it, forecasts.

Dan Egan is a behavioural scientist. He is darn good one too as he is the Managing Director of Behavioral Finance & Investing at Betterment. He wrote a cool blog post on how he manages his monthly cash flow.

Personally, I use 22seven but it can get quite tedious. You have to be disciplined to ensure all your expenses go into the right categories. I am lucky that I don't mind doing but most people find it a pain. Dan doesn't use categories and he spends anything that he hasn't earmarked for saving. He is kind enough to share his method in the following blog post:

https://www.betterment.com/resources/behavioral-science-monthly-cashflow/

In case time is short. Dan sums his method as follows:

- Spend what you don't save
- Earmark and automate
- Minimize overhead
- Vaccinate against lifestyle creep