Cash Flow
Cash flow describes how money moves into and out of your finances over a specific period of time.
It compares incoming money, such as income or payments received, with outgoing money, such as expenses and bills.
Positive and negative cash flow
Cash flow can be:
- Positive cash flow: More money enters than leaves.
- Negative cash flow: More money leaves than enters.
Maintaining healthy cash flow helps ensure expenses can be covered while still working toward savings and financial goals.
Why cash flow matters
Understanding cash flow helps people:
- Avoid running out of money.
- Plan future spending.
- Identify periods of higher expenses.
- Improve savings decisions.
- Prepare for upcoming financial commitments.
Cash flow and budgeting
A budget plans future cash flow.
Tracking actual transactions shows whether expected cash flow matches reality.