SEATTLE -- Financial planner Martin Kurtz was going through his mother's things when he came across an old copy of the 1952 classic Amy Vanderbilt’s Complete Book of Etiquette.

In it, the FPA board member found a surprisingly potent piece of advice about the risks that joint checking accounts can pose to a marriage.

“A joint checking account is a constant source of possible friction,” Kurtz read from the book to about 100 financial advisors at a talk at FPA's annual conference here.  

In the book, Vanderbilt recommends that husband and spouse find a way of separating out two cash flows and, then, basically stay out of each other’s financial hair.

Kurtz couldn’t agree more. And that is a boiled-down description of what he and his colleague Andrew Sivertsen, president of FPA NexGen, say they recommend to their clients.

NexGen is a group of planners under 36 who are looking to forward the profession. Kurtz and Sivertsen are partners in The Planning Center of Moline, Ill.

“How often have you had people say, ‘My spouse spends all the money, and I don’t know where it goes?’” Kurtz asked the audience.

Nearly every hand in the room went up, as eyes rolled wearily.

The speakers’ overall approach to planning is novel, they said, because it begins with their clients’ cash flow, an area in which most planners fear to tread.

For every planner, there is a long list of factors that they can’t control in their clients’ financial lives from market performance to divorce and death, to name just a few, Sivertsen said.

“One thing we can help [clients] control is their cash flow,” he said.

Furthermore, “Cash flow needs are one of the single most influential things in a financial plan,” Sivertsen said.

The pair offered the following tips for talking about the subject and planning for cash flow needs with their clients:

1. Start the cash flow conversation, even though it is hard. “People don't want to talk about their cash flow,” Sivertsen said. In starting, think of this conversation as “communing” with clients, and practice being entirely non-judgmental in the process, Kurtz said.

2. Break cash flow into three buckets. One way to start thinking about cash flow is to think of it flowing into the following categories:

  • Past commitments, such as the continuing mortgage payment and utility bills. “We sit down with clients, and we get a number” covering all these needs, Sivertsen said.
  • Present needs, including food, entertainment and clothing.
  • Future needs, such as saving for college, a home or a vacation.

3. Use auto payments. Once the expenses that are predictable and continuing are defined, set up automated bank payments into a network of separate accounts to cover those bills. Then there is leftover cash flow to consider.

4. Use a feeder account to smooth out income. When it comes to clients with unexpected income flows, such as long periods without income, followed by sizable commission payments, open a feeder account into which those payments are directly deposited. Then, the regular disbursements come out of that account according to the plan. “Have the big checks go in there. Have the money that comes out of it come out in a steady drip,” Kurtz said.

5. Decide how much cash each spouse gets weekly. Set up automatic payments that deliver a fixed amount into each spouse’s account every week to cover all their present needs. “We really think each spouse should have their own money to control,” Kurtz said. “Then it doesn’t matter where the rest goes.” In his own marriage, he and his wife set aside money out of their weekly income streams for anything else that they need and that hasn’t been explicitly budgeted.

6. Don’t use credit cards. The system doesn’t work if couples rely on credit cards. It works if they use debit cards or by taking the money out weekly in cash. “When you mix your fixed obligations and your point-of-sale purchases, you have no idea where you are at,” Kurtz said.

7. Put the system into practice. “This all sounds really smooth, but here’s the story: This is not an easy conversation. Stay at it, practice it, use it yourself, you will get better at it,” Kurtz said. “I’ve never met a person who teaches this and doesn’t start using it in their own life.”

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