Three Common Cash Flow Mistakes and How to Fix Them

A woman tracks spending in a spiral notebook.

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published 15 February 2025

Over the past decade, I’ve worked with all sorts of people preparing for retirement. What’s interesting is I cannot find a reliable correlation between income received from employment in relation to how much someone has saved. Some have higher incomes with little savings for retirement. Some have never made more than a modest income while living a happy life and have saved more than seven figures for retirement.

Everyone’s situation is different. The financial variables are endless. However, over the years, I have noticed a theme between those who have enough saved for retirement (based on their expectations) and those who do not have enough.

To be clear, the word “enough” in relation to retirement savings is a very subjective term and should be assessed on an individual basis. Also, I want to clarify that in each situation, the individual or couple made more than their total basic expenses. There is a tipping point everyone needs to reach before they can afford to start saving for retirement. However, once a person crosses that threshold, based on what I have seen, their ability to save for retirement seems to have more to do with how they manage their cash flow than anything else.

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The following are three common cash flow mistakes I have noticed many people make. These mistakes can hurt your ability to enjoy your life in the present while also saving for retirement.

Mike Decker, NSSA®

Mike Decker is the author of the book How to Retire on Time, creator of the Functional Wealth Protocol and the founder of Kedrec, which specializes in comprehensive wealth planning and management. He specializes in creating retirement plans designed to last longer than you™, without annuitized income streams or stock/bond portfolios. Mike is also a national coach to other financial advisers and frequently contributes to nationally recognized publications.

Mistake No. 1: Automating your budget

When you automate your budget, you can create cash flow blind spots. Many of my wealthiest clients seem to have one common behavior: They manually track every transaction. They know exactly where their money goes. They notice when certain expenses, such as auto insurance, utilities or certain subscriptions, go up. They are not old-school because they are older. They do not resist using apps because they hate technology. They manually track everything because they want to know where their hard-earned money is going.

Manually categorizing and sorting every transaction raises your cash flow awareness, which allows you to make more informed decisions. You cannot fix problems if you don’t know what they are. Manual categorization is key to helping you have more control and awareness over your monthly cash flow.

If you don’t want to use a spreadsheet to manage your budget, consider using an app called Cash Flow & Capital. It’s the only one I have found that automatically uploads your transactions while allowing you to manually categorize them within your custom spending plan.

Mistake No. 2: Not shopping around

It is easier to assume the price you pay for a specific service is the best price and that you don’t need to check it again. The reality is you have a lot more power over price than you may realize.

For example, have you ever considered switching phone carriers? It may seem scary at first. However, when you understand the difference between companies like Mint Mobile and AT&T or Visible and Verizon, you may realize that you are paying for more features than you need. Sometimes, it may make sense to switch and save money.

Another example is shopping for insurance. This is tricky because insurance is not an investment. When you pay more, you typically have more coverage or benefits. This is why you hear certain commercials warning you about “cut-rate insurance.” That said, you get to decide what you are willing to pay for and what you don’t want to pay for.

Shopping around can make a big difference in your savings. Let’s say you make a few adjustments and end up spending $250 less per month. If you invest that $250 per month ($3,000 per year), assuming a 7% growth rate, you’d have about $41,000 after 10 years or $122,000 after 20 years. If you identified and adjusted $1,000 per month of unnecessary expenses or inefficiencies, that could mean $165,000 in 10 years or $491,000 in 20 years.

If your quality of life is not negatively affected by making a few adjustments, then why not take the time to shop around? It’s not just about saving for retirement. It’s about having more control over how you spend your money.

Mistake No. 3: Holding on to too much bad debt

Not all debt is bad. In my opinion, debt that is associated with an asset that can appreciate in value, like your home mortgage, can be a good thing. Another way to say that: You appreciate debt that is tied to something that appreciates in value.

Bad debt, in my opinion, is any debt associated with something that depreciates in value, like a car. Bad debt also includes credit card debt because it doesn’t really have any value tied to it. Another way to spot bad debt is any debt that has a high interest rate. As a rule of thumb, if your interest rate is 1.5 times more than the 10-year Treasury yield, your interest rate may be a little higher than is desirable. Consider paying down that debt as fast as possible or refinance it at a better rate.

Many times, we rationalize the payments on bad debt without realizing how much of our cash flow is taken up by interest. If you have debt that is tied to something that is losing value or has a higher interest rate, pay it off as fast as you can. Free up your cash flow so you can be more productive with your money.

Conclusion

To quote Benjamin Franklin, “Beware of little expenses; a small leak will sink a great ship.” Sometimes, the answer isn’t more income — it’s better cash flow management. You cannot solve problems you do not know exist. Track your cash flow. Identify any imbalances. Create systems that can guide you on your path to success. If there’s a spending addiction, allow your cash flow management system to help you spend within your means as you heal along the way.

Disclaimer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Mike Decker is the author of the book How to Retire on Time, creator of the Functional Wealth Protocol, and the founder of Kedrec, a Registered Investment Advisory firm located in Kansas that specializes in comprehensive wealth planning and management at a flat fee. He specializes in creating retirement plans designed to last longer than you™, without annuitized income streams or stock/bond portfolios. In addition to helping people achieve their financial goals, Decker continues to act as a national coach to other financial advisers and frequently contributes to nationally recognized publications.