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Your Cash Flow

  • Author Author Ken Payne
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  • Blog entry read time Blog entry read time 2 min read
Doing a cash flow worksheet is the best way that I know of to get a handle on your personal finances. So let's take a look at what all this means. In most large businesses, finance departments set up and religiously review departmental cash flow budgets.

cash-1462856_640.jpgThere, I said it... the much feared "b" word. Generally, most people hate budgets. Why since "budget" is just a word like any other? Well, people look at it like it means they will somehow" be deprived of something they really need ...like air or food. Not so... it just means we need to account to someone for what we choose to do with our money. I remember hearing many times as a kid "we can't afford that" but it was said in a very different way than other kids I knew. It seemed to mean "We are choosing not to afford that". While this may be me rewriting the meanings of the past, it worked for me. Money was "to save" or "to buy things of lasting value" it was not "to spend". This money message seemed to stick with me.

But ...back to the discussion of Cash Flow. I've discovered that many people hate the whole "budget thing". They hated to track what they spent, what they saved, to discuss money in general. I have since come to greatly appreciate the need and benefit of an objective third party. So the entire financial planning discussion is like a big tightly wound ball of string. You just have to carefully unravel it to make progress. So we will use another word to stand for budgeting - cash flow. This is more of a corporate word but it describes more closely what we need to worry about. So what is cash flow - it is the money coming into your household. It is also called income... but let's not get ahead of ourselves. (Unless you think I am being too simplistic here, income can be taxed or non-taxed, earned income or unearned income and there are lots of variations for each one). So cash flow is money, from whatever source, that comes into the household. The next thing we will look at is our expenses. These are simply the "bills" or money we owe to ourselves and to others. So the math formula looks like this...and you thought unless you went into engineering or a science field -that after high school math would not be very important.

We will stick to what I call "money math".

Cash inflow (wages, gifts, other income) – Expenses (mortgage, rent, auto, food , insurance, etc) = Disposable income (cash we can decide touse to pay for other goals/stuff).

Cash Inflow - expenses = disposable income

So do not wait around, get a piece of notebook paper/legal pad/or an excel spreadsheet or the back of a large envelope. On the left side write down your monthly cash "inflow" on the right side write down the totals of what you spend by category. See what you learn.

Image: CC0 Public Domain, Free for commercial use, No attribution required https://pixabay.com/en/cash-flow-cash-flow-cycle-money-1462856/


This is one of those things far too many people overlook. It goes hand in hand with a budget.
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Ken Payne
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