Cash flow

Even if you spend a lot of time managing your personal finances, you probably don't think of your income and spending in terms of cash flow. If they use the term at all, most people think that cash flow is something that businesses have to worry about. But you also have a cash flow, and figuring out whether it's positive or negative is an important part of managing your money.

The ins and outs of your money

The constant movement, or comings and goings of your money, make up your cash flow. When you deposit your paycheck, money is coming in; when you buy something, it's going out. The difference between the two determines whether you have a positive or negative cash flow. For example, if over a year you bring in $50,000 in earnings and pay out $40,000 in expenses, you have a positive cash flow of $10,000. But if you spend $52,000 — your cash flow is negative $2,000 and needs attention.

Having a positive cash flow means you can pay your bills on time and cover any other immediate expenses — plus have money left over to spend as you wish. Even more important to your future financial security, having a positive cash flow means you'll be able to save for long-term goals like a comfortable retirement, a down payment on a home or a college education.