Cash flow is simply the movement of your income and outgoing money. Cash flow can be broken down into:
Income | Expenses |
Salary | Bills |
Interest | Loan repayments |
Rental income | Rent or property costs |
Dividends | Insurance |
Cashflow is critical to a financial plan as it will identify potential issues or opportunities. To be able to save and invest, your cashflow needs to be positive, that is your income is greater than your outgoings. For some people, saving comes naturally, for others not so. Regardless, having a documented budget which you actively follow and track could help you achieve your savings and investment goals.