Building long-term wealth is key to meeting your major financial goals, such as buying a home, raising a family, and saving for retirement. There are several things you can do to help create wealth. Investing regularly is one of them, and so is saving taxes through registered products like RRSPs and TFSAs.

It’s also important to manage your cash flow, which is just a fancy way of saying that you should keep an eye on the money you earn (i.e., your income) and the money you spend (i.e., your expenses).

Why is cash flow management important? You want to ensure that you have enough cash to cover your day-to-day living. Also, managing cash flow helps identify areas to spend more wisely and reduce debt, which can leave you with more money in your budget to put towards your goals.

Spendable vs. committed cash flow

Let’s dive a bit deeper into the concept of cash flow, with assistance from our partners at CacheFlo. This Canadian fintech company focuses on behaviour-based financial literacy, educating people on the choices they make about their money and offering practical online tools that can help individuals make smarter decisions and improve their financial well being.

CacheFlo considers two sides of cash flow: spendable and committed.

• Spendable cash flow includes the categories of wants, variable expenses and discretionary expenses, such as groceries and eating out, entertainment, travel, hobbies, and gifts. This spending is typically unpredictable, and emotion based. Given their nature, spendable expenses aren’t usually suitable for automation because they change from month to month depending on circumstances.
• Committed cash flow is the opposite, as this type of spending is more predictable and not driven by emotions. It includes expenses related to housing (e.g., rent or mortgage payments, utilities, home insurance), transportation (e.g., vehicle payments, gas, parking) and other financial obligations (e.g., investments, emergency savings, childcare). Committed expenses benefit from automation because they’re normally recurring charges on a regular schedule.

While the CacheFlo website provides more details about spendable and committed cash flow, here’s a big takeaway: by establishing separate accounts for spendable and committed expenses, you can better understand and manage your spendable cash flow, while automating your committed cash flow frees up time and mental energy so you can focus on other aspects of your finances.

Why have we partnered with CacheFlo?

We believe good financial education is key to helping you make wise decisions about your money. Few people truly understand cash flow management or know where to turn for reliable information. CacheFlo is committed to enhancing the financial literacy of Canadians and offering the tools required to put their learnings into action.

CacheFlo recognizes that learning about money and spending doesn’t guarantee a change in behaviour. The company calls this the “knowing-doing gap,” and it takes an innovative yet simple approach to helping people make meaningful, immediate changes to their financial behaviour through advanced technology, targeted eLearning, and a range of financial literacy tools.

For example, in collaboration with CacheFlo, we’ve created two straightforward, interactive lessons to help you better understand your saving habits and investing options. You can access the learning modules (RRSP vs. TFSA; Saving vs. Investing), plus a suite of interactive lessons covering relevant topics, exclusively through the CacheFlo learning platform.

Winton: Cash flow management, made easy

CacheFlo has also created an impactful web-based app called Winton. The app makes it simple for you to your finances, so you know and how you can save more of it. By investing some or all of your on a regular basis, you’ll be on a good path to growing wealth and achieving your financial objectives.

Winton allows users to create a personal financial profile and will provide personalized guidance on saving, spending and investing. This handy app will crunch all the numbers for you while helping you organize and optimize your finances. Best of all, Winton is a free value-added tool that’s available on request to CI Direct Investing clients.

As always, we’re here to help you map out your financial future, and our partnership with CacheFlo equips you with another practical means of helping you on your journey. If you’re interested in effective cash flow management, simply log in and send us a message requesting access to CacheFlo’s learning platform and the Winton app. One of our wealth advisors will be happy to help you get started.