Organize Your Finances – Cash Flow

Many of us of us struggle to keep up. Often times finances are the last thing on our minds until there is a problem with them. This is part of a series of articles written to help you Organize Your Finances.

The first step in organizing your finances is to determine what it is you’d like to accomplish. You can read about Setting Goals andKeeping Goals on previous posts. After your goals are set, you need to take a good look at your cash flow so that you can figure the steps necessary to fund your goals. I suggest doing this in 3 steps:

  1. Figure out how much you are spending.
  2. Figure out how much you earn and pay in taxes.
  3. Subtract your expenses and taxes from your income for your discretionary income.
This is a Cash Management Analysis. It does two things: 1.) it brings awareness to your spending habits, your taxes, and your income AND 2.) it allows you to plan accordingly. By planning accordingly I mean that when you are faced with a decision to a buy new or used car, or bigger home, or even just to add a monthly cable bill to you expenses, you’ll know exactly how that is going to impact your cash flow. So let’s explore how to figure your cash flow in a little more detail.

Spending – The best way to know where you are spending your money is to import all your credit card and banking transactions for the last 4 months into a FREE online budgeting software. I prefer, but there are several out there, including,,, and others. Once you’ve opened an account and imported your transactions, you can look at trends in spending.  As you get more data, you’ll know how much goes towards food, auto, and housing expenses. This also tells you where you can lower your expenses if needed. If you’re interested, you can compare your spending habits with that of the rest of the country by looking at the latest Consumer Expenditure Survey. does a nice job of suggesting ways to saving money on credit card interest and fees, insurance rates, and others.

Income & Taxes – The best way to do this is to look at Total Income on line 22 of last year’s tax return. Subtract line 60, Total Tax AND any State or Local Taxes from their respective returns to determine After Tax Income.

Discretionary Income – Subtract your expenses from your after tax income to determine how much you have available to fund your goals. This will let you know if you are living above or below your means, and how much you have to put towards your goals.
This analysis lets pre-retirees know how much they can save, and what they may need in for an after-tax income retirement. It prevents retirees from running out of money because they know know if they are spending more than their portfolios can handle. Whether you are a pre or post retiree, once you are aware of where your money is going, you can make conscious decisions with your money.

Parting thoughts, the best way to lower your expenses is to cut out unnecessary items and reduce big ticket items, i.e. cars and homes. For more ways to save, see my blog posts Mortgage Habits of Millionaires and Avoiding Blackhole Car Habits.

About the author

Richard T. Feight, CFP®

Among independent financial advisors, Mr. Feight is one of the most well known and highly respected “Fee-Only” financial planners. Since 1997, Rich has dedicated his career to offering low cost “Fee-Only” comprehensive financial planning and investment advice. Rich assists his clients in organizing their finances so that they can retire on time.Rich is a graduate of Michigan State University where he received his degree in Finance. Rich has earned the Certificate of Financial Planning from The College for Financial Planning in Denver , Colorado that was comprised of intense graduate level classes grounding him in the various foundations of financial planning. He is a CFP® (Certified Financial Planner®) since 2001, meeting the experience, education requirements and passing the two-day, 10 hour exam, making him one of the few in the country who hold the designation. Since 2003, Rich has subscribed to the stringent and mandatory annual educational hours, experience, and code of ethics to meet the requirements to be a NAPFA Registered Financial Advisor. Out of the 800,000 individuals in the country who claim they are financial advisors/planners, fewer than 1,300 in the country qualify for the membership; Rich is one of them.

Rich is the President of the Financial Planning Association (FPA) of Michigan . The FPA of Michigan is one of largest and influential chapter in the country. Rich was recently named President for Transportation Toastmasters Club 4776 downtown Lansing . He has been quoted in both local and national media from Noise Magazine to CNBC, and Bloomberg, and industry news publications such as Investment News and Financial Advisor Magazine. Rich enjoys public speaking and has spoke at industry educational meeting, high schools, and executive investment clubs, AARP conferences, and business educational seminars for companies looking to educate their employees. Rich views his role as a Fiduciary for his clients as the single biggest key to any planning relationship and strives to provide the most competent, unbiased and objective advice in the financial planning profession today.

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