The Importance of Budgeting & Cash Flow Planning: Q&A with Greg O’Brien of Dunphy Molloy & Associates
Having a budget and sticking to it can be hard enough during the best of times. But if you work in the arts, or as a freelancer, or in any position that requires balancing multiple gigs with inconsistent income, that balancing act becomes even more difficult. Throw in a global pandemic and the uncertainty that comes with it, and the financial stress and anxiety increases even more.
While it won’t magically melt all the stress away, having a good grasp of the essentials of finance management will help put you in a better position, and give you some confidence, when it comes to managing your money. That’s why Business & Arts NL is proud to launch its Financial Literacy Workshop Series.
Greg O’Brien, Financial Planner
Whether you’re looking for tips on how to manage debt, build a financial safety net, the best budgeting software, or how to prepare for tax time (just to name a few), this series aims to equip artists, arts organizations and creative entrepreneurs with the tools they need to manage their finances and plan for the future.
On Tuesday, June 16, Greg O’Brien (a financial planner with Dunphy Molloy & Associates) will lead the first session in this virtual series. Greg will talk about “The Importance of Budgeting and Cash Flow Planning,” including how to prepare a working budget and effective cash flow plan so that you can manage and track your financial health. Whether you’re new to budgeting or just need to brush-up on your skills, there’s never been a better time to learn more about financial literacy.
We recently caught up with Greg to talk about budgeting during unpredictable times.
Business & Arts NL: What can you say to people about the importance of brushing up on their budgeting skills, especially during the unpredictable times that we’re currently living in?
Greg O’Brien: Budgeting is the foundation of being financially stable. People need to have a handle on their income and expenses in order to make sure they are covering the cost of everyday life. Beyond that, they need to think about building savings and protecting their income. During uncertain times like today’s economic environment, those that are best able to fend for themselves financially would have emergency savings built up and other forms of protection in place to weather the storm if they have lost their job or had a reduction in income. This would all start with creating a budget and identifying disposable income that could be tucked away for future use. If there is no disposable income or even worse, negative cash flow, things need to be addressed and likely a reduction in spending is necessary.
Business & Arts NL: Sticking to a budget can be tricky during the best of times. What’s one of the most effective ways in which people can be successful at this?
GO: The best approach in my experience is to document your budget. I’ve seen many different forms of this – using Excel spreadsheets, budgeting apps, handwritten on the back of an envelope, etc. If you are recording where money is being spent, you are going to be much more cognizant of every dollar that comes out of your pocket. You need to be realistic with your budget, track it accordingly and adjust where necessary. To go beyond that, if you really have trouble with sticking to the budget, moving to a cash only system may work. This has been popularized by the mason jar or envelope approach whereby you allocate your expenses into different categories. Each jar represents a certain category and when you take in income, you transfer it to cash and place the monthly total per category that you can spend into the mason jars. You cannot spend anything beyond the cash in the jars each month.
Business & Arts NL: For those with inconsistent income and pay periods, what’s one of the best pieces of budgeting/cash flow advice you can offer?
GO: If income is not consistent month to month, projecting out income over a longer period can help. This way you can average out your income for the year, for example, and get a good sense of what monthly income will be. Then you should try to keep expenses below this monthly income average. In situations like this, people should be using a savings account to tuck away money above the average in higher income months or they may need to use credit to supplement months with lower income and then repay the debt in months with a higher influx of cash. If you are doing this, be smart about the kind of credit you are using to reduce the overall interest accruing ie. A line of credit at 5% would be much better than a credit card at 20% interest.
Workshop: The Importance of Budgeting and Cash Flow Planning
Date/Time: Tuesday, June 16 from 1-2pm
Location: Online via Zoom
Price: Free
Registration:Click here