When Stefan and Donna first came to see us in early 2006 their story was typical of what we see with many of our clients. They were concerned about their lack of control over their debt and this led to worries about their ability to fund the things they wanted in the future, such as paying for their children’s education and saving for retirement.
Prior to 2006 they had been on a roller-coaster ride with their debt, having originally taken out a line of credit loan in the amount of $240,000 to purchase a new home.
In the 13 months prior to meeting with us they had not been able to make any dent in this debt and had actually seen it increase to $259,000.
During the interview they acknowledged that they were their own worst enemies when it came to spending and had been too afraid to develop a household budget.
Consequently, when pressed as to where they thought the overspending was occurring, neither of them could agree on specific areas. It was all too easy to dip into the line of credit to meet their spending habits.
Having seen this scenario, often we knew we had the tools to assist with their situation, provided Stefan and Donna had the desire and the discipline to follow the plan.
We introduced them to our Internet-based Cashflow Review software, which allows our clients to record their detailed income and expenditure on a monthly basis and then report on the outcomes in real-time against predetermined projections.
The system maintains an historical database of all monthly cash flow information, and reports can be produced over any timeframe. Apart from the ability for clients to produce real-time reports, the data on cash flow and debt position is shared with Xplan, our client information system, and is then used within our regular client review process.
Stefan and Donna completed an initial cash flow budget and over the course of the next 12 months they recorded their detailed income and expenditure into the system. This then tracked Stefan and Donna’s actual debt position month by month against projections that we had agreed upon based on their budget.
The first three months did not go well as they continued to overspend against the budget. With the system tracking each item of expenditure over this period, we were able to present Stefan and Donna with a detailed analysis report that highlighted their problem areas of expenditure.
Armed with this information and our continuing education program, Stefan and Donna quickly brought their spending under control; had it not been for some unforeseen medical expenses in early 2007, they would have met their projected target.
By continually reviewing their expenditure each month via the Cashflow Review system, Stefan and Donna have been able to control their expenditure and significantly reduce their debt levels over the past year.
During this period, Stefan and Donna have also been able to commence an investment program that will help them achieve their long-term objectives.
The Internet is now an integral part of most people’s lives and they are increasingly demanding real-time access to data. Meeting our clients’ demands in these areas, software has proven to be an invaluable tool in the management and reporting of their household cash flow.
Glenn Pearce is the general manager of WB Financial.
