When my wife and I first got married, we had some fits and starts in getting our finances in order. A lot of the traditional budget formats didn’t work out very well for us. So instead, we decided to toss the idea of a budget and measure our cash flow instead.
Typically, a budget will just be a list of expenses on one side and income on another side. The goal of course, is for the expenses to be smaller than the income.
But what if you are still living paycheck to paycheck? What if your checking account has a minimum balance requirement? How can you sure that, while your income is greater than your expenses, your expenses don’t occur before your income, costing you more money?
So instead of budgeting, we anticipate our cash flow. An Excel spreadsheet lists our paychecks and bills in chronological order with their amounts and then adds or subtracts the value from the previous balance. This way, we know that on the 9th, for example, we will have a balance of $
How a cash flow budget works
Typically, our cash flow statement extends out 6 months at a time. We go through it and search places where the balance is below where it needs to be. At those places, we prop it up with some money from saving, or move a little less into savings the previous month. At the end of each month, we move into savings everything that isn’t needed to keep the checking balance above level throughout the next month.
If an unplanned expense comes along, or a bill or paycheck is different than expected, we update, and check again.
- The Anti-Budget, Budget (budgetsaresexy.com)
- January 2012 Cash Flow (retireby40.org)
- Five Best Apps to Forecast and Manage Cash Flow (entrepreneur.com)