Cash Flows

March 09, 2015  •  Leave a Comment

So, now you have started a budget, you have an emergency fund, and you are getting an idea of how much money you have or spend.  Well, how do you know that your spending won't cause you to overdraft your checking account?  That's where cash flows come in.  It's a very simple thing.  Use a spreadsheet, or even write it down on paper.

A cash flow is exactly how it sounds.  It's a record of your cash, incoming and outgoing.  If you put all your bills into a cash flow at the time they will be going out, you can start to predict where shortages and overages will be.

For example:

Jan. 1 - income of $1500

Jan. 1 - Rent of $500

Jan. 13 - Electricity of $70

Jan 15: income of $1500

Jan 23: Gas of $40

Putting this all in here's what we see

Item Amount Total
Income $1500

$1500

Rent $500 $1000
Electricity $70 $930
Income $1500 $2430
Gas $40 $2390

 

You will do this for all the items in your budget.  This will get larger, but keep after it.  It's a good thing to keep track of, and essential to not becoming a slave to the bank.

If you have irregular income, this is even more essential.  This will also force you to call people if you haven't been paid within 30 days.  You have a 30 day pay clause in your invoice, right?

Shoot me a line if this doesn't make sense to you, and I can help you.

 

Blessings,

Andrew Krob

 

I am not a financial planner, or a certified professional accountant.  Please contact them for any advise you need.


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