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Q. I have been on disability for several years due to a chronic illness. I am approaching 65 years of age in less than two years. At that time, my disability payments end and my Canada Pension Plan (CPP) payments are reduced, which should be offset by Old Age Security (OAS). I have savings and annuity payments but need assistance in budget planning and asset allocation for an uncertain life expectancy. —Thank you, Mark

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FP Answers: Mark, I am sorry to hear about your disability. My wife has a mild brain injury and is collecting CPP disability, so I have a sense of what you are experiencing financially and know it must be tough to be single and disabled.

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Let’s get right to budgeting because taking control of your cash flow is key for you, and for everyone. Budgeting is one method but it is not a naturally easy thing to do and it requires the discipline that most people don’t have. Budgeting is good for vacation planning or home renovations but not for living your life. Ideally you can implement a cash flow management system you can automate.

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Fortunately, the Certified Cash Flow Specialist Program for financial professionals provides a system that controls your spending, frees up money, and best of all, once it is set up it runs on autopilot, meaning there is nothing you need to do. I have summarized below how it works. It may sound a little confusing but take your time and I’m sure you will get the idea.

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The first step is to write out all of your expenses and itemize them into two categories: working cash flow (WorkingCF) and active cash flow (ActiveCF). WorkingCF expenses can be expenses that get you ahead. There is no risk of overspending and there is no emotional pull to want to spend more. They are usually fixed payments, often a need, and the payments are easily automated. Some examples include phone, hydro, fuel and debt payments.

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With ActiveCF expenses there is often an emotional pull to want to spend more. They are often variable expenses, meaning things you want but don’t need, and it is difficult to automate the payments. Some examples include entertainment, vacation, and some groceries.

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Now you have a list of expenses divided between WorkingCF expenses and ActiveCF expenses. Tally up all of the expenses for each category and then work out what you spend weekly on WorkingCF expenses and ActiveCF expenses.

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Finally, determine your weekly take home pay and calculate what percentage your weekly ActiveCF expenses are to your weekly take home pay. Aim for a ratio of 20 per cent ActiveCF to take home pay. If you are in good financial shape 20 per cent may be too restrictive but if you are having real money issues, try restricting your ActiveCF expenses to 15 per cent of your take home pay.

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Automate things by setting up two bank accounts and call them WorkingCF and ActiveCF. Your income goes into the WorkingCF account and pays all WorkingCF expenses. Automate every expense and never make ATM withdrawals from the account. Attach a credit card to the account so it is automatically paid off each month and use the credit card to pay WorkingCF expenses that can’t be automated, such as gas. Each week auto transfer 20 per cent of your weekly take home pay to your ActiveCF account.