Financial Health - Determining Your Cash Flow

A cash flow analysis is the first step in determining whether or not your spending is "out of control" and if you need to create a budget to rein it in. A successful budget will give you greater control of your money and help keep you on track to reaching your financial goals.

Evaluate your spending
Your cash flow analysis shows how you spend money on a daily and monthly basis. To determine your cash flow, you should:

• Track your spending for several weeks. Record every dime you spend--both how much and what it was for. Don't just record withdrawals for cash--record what that cash was spent on. You should be able to account for everything.
• Gather receipts. Organize the receipts for all of the expenses you've been tracking. Be sure to include your credit card bills and checkbook register for the last few months.
• Total your monthly income and expenses. Begin to add up all of your tracked expenses as well as your monthly income.

Create your budget Your cash flow analysis will show you if you are spending more than you are earning and what expenses you may have to cut back on and budget for more carefully. To get started, you will need to prepare an accurate account of your monthly income and expenses. You will need to organize the following information:

1. Your pre-tax monthly income. This includes salary, investment income, etc.
2. Your monthly expenses--fixed and variable--in the following categories:
   • Combined taxes. Your federal, state and social security taxes withheld every month.
   • Housing. Your mortgage, rent, association dues, insurance, etc.
   • Home care. Include cleaning, landscaping, repairs, utilities, etc.
   • Food. Include your groceries, dinners out and all other food expenses.
   • Auto. Monthly payments for your car loan or lease, insurance, maintenance, parking, gas, and other expenses you might have.
   • Insurance. List premiums for your health, disability, life, and any other insurance policies. If you pay quarterly premiums, then divide by three to get a monthly figure.
   • Education. Any tuition you currently have for your child or yourself as well as any student loans, etc.
   • Personal Care. This includes clothing, cosmetics, gym, entertainment, vacation, gifts, etc.

Use the Cash Flow Worksheet on the following page to determine your own personal cash flow.