You can own valuable assets and still run out of room before month end. Cash flow is the reason, and it is the one view a list of balances cannot give you.
Cash flow is the movement of money into and out of your household or business. Start with income you actually receive. Then list regular expenses such as housing, debt repayments and premiums, followed by changing costs such as food, transport and electricity.
The trap is a quiet month. School costs, vehicle services, annual subscriptions and family commitments arrive less often but still belong in the picture. Divide an annual amount by 12 for a rough monthly view, or keep it as an irregular item with its due date.
If income varies, as Priya’s business drawings do, one month may be misleading. A three- or six-month average can provide a steadier starting point, while the lowest month shows how much pressure may appear.
Income above expenses creates a surplus. Expenses above income create a shortfall. Neither label is a moral judgment. It tells you whether the current pattern leaves room for saving, unexpected costs or debt reduction.
Try this now
Use your latest bank statement and list:
- total income received;
- regular expenses;
- changing expenses; and
- irregular costs that did not appear that month.
Mark any category that is still only an estimate.