Understanding Your Cash Flow
Lesson 1 of 4 in Money Foundations · 8 min read
Every financial plan starts with one question: where does my money go?
Income vs expenses
Your cash flow is simply what comes in minus what goes out. Positive cash flow creates the surplus that funds every future goal. Negative cash flow, even by a small amount, slowly builds debt.
Track before you budget
Before setting any budget, record every expense for a month. Group them into needs (rent, groceries, EMIs, insurance), wants (dining out, subscriptions, shopping) and savings.
A starting framework
The 50-30-20 rule is a useful starting point: about 50% for needs, 30% for wants and 20% for savings and investments. Adjust it to your life, the goal is awareness, not perfection.
Pay yourself first
Set up an automatic transfer to savings on salary day. What you never see in your spending account, you rarely miss.
Key takeaways
- Track income and expenses for at least one month
- Pay yourself first by automating savings
- Use a simple 50-30-20 split as a starting framework