How Does YOUR Cash Flow?

Earlier, we began a three-part series on cash flow planning —otherwise (and not so popularly!) known as budgeting. As part of that first article, I pointed to our Recommended Cash Flow Guidelines (in the Downloads section of the SMI website), which show what a plan might look like for households that earn various levels of income.

I thought it would be helpful to explain some of the assumptions I made in developing those guidelines and to share some of the conclusions that seemed to jump off the spreadsheet while putting the guidelines together.

To develop a plan tailored to your unique situation, here’s the process I recommend. First, enter your gross income. Then enter amounts for generosity, saving/investing, and debt payments. Then fill in your essential expenses (i.e., food, utilities, insurance). Last, see how much you have left over for discretionary expenses (i.e., entertainment, clothing, vacations).

I’d appreciate hearing your feedback on all of this. Are there any areas where the guidelines or assumptions seem wildly off base? If you live in a high cost-of-living area, how do you make it work? What have you had to do in order to live generously and save and invest adequately? If you pay a lot for health care, how do you make that work?

Clearly, cash flow planning is not a one-size-fits all proposition. But hopefully the Recommended Cash Flow Guidelines are helpful for putting together a plan that works for you.

*Image used with permission. *

How Does YOUR Cash Flow?

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