Monday, February 18, 2008

Focus on Positive Cash Flow

You need to know your cash flow. Net worth is a great indicator of financial health but another important component is your cash flow. Cash flow is simply your total income minus your total expenses.

I recommend calculating your cash flow on a monthly basis. If you cash flow is positive that is great. However, if you cash flow is consistently negative then you have a problem that needs to be addressed as you are accumulating debt or tapping into your emergency fund. You will either need to grow your income or reduce your expenses. It’s actually quite simple - spend less then you earn.

Start tracking your cash flow and keep your spending in check.


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The articles on Daily Money Tips reflect the opinion of its author only and should not be considered professional financial advice. Please consult a financial professional before making any major financial decisions.