Cash Flow

Understanding your cash flow to know where is your sources of income and where you spending your money.

As we continue to figure out just where you are, you need to analyze your cash flow. Where does the money go each month? Here's where you figure that out. Unless you are planning to receive an inheritance, they only legal place I know of that you can come up with the cash to invest is from your income stream.

The cash flow worksheet is over a month's time, Why, you ask? So that you understand not only where you are spending but also how you are spending your money.

Unless prompted, readers forget a category or two. Here accuracy counts, neatness does not. A large miscellaneous number means you haven't taken the time to figure out where the money has been spent. You'll never be able to analyze where you can save money unless you know where you are spending it. What consumes your income?

Prepare your Cash Flow Statement

Track every single thing you spend your money and figure out the smallest discrepancies in your cash flow.

Lean to track every single thing you spend your money on (this often a real eye-opener) and to write down how you feel about these expenditures and even what you were feeling when you decided to pop into a department store to have a real shopping binge.

List your sources of income. your salary (use your gross salary here so you can keep track of your withholdings), alimony, child support, interest income, and dividends. This is what flows into your hands.

Next let's look at the expenses---what flow out of your hands. Your rent/mortgage payment and car payment are fixed monthly expenses that don't usually change. You know what those are. For things like telephone, utilities, and medical bills, try to get those numbers from last year's checking account and credit card records. Check out the discretionary expenses next. These are the extras in your life, and for some of you, they may actually be essential it's your call here.

If you want to project your expenses for the upcoming year, take last year's expenses and multiply them by an inflation factor of 4 percent. To do that, just multiply last year's numbers by 1.04 to get your projection.

Two very good software packages for helping you track your expenses and portfolios are Intuit's Quicken and Microsoft Money.