October 3, 2023

How To Determine a Cash Flow Budget That Matches Your Lifestyle

Through the course of a year’s salary and living expenses, your inflow and outflow of funds can fluctuate. Incidental expenses, like staying an extra night on vacation because flights are grounded or splurging a little more than normal on occasion, can add up. 

Creating a cash flow budget helps you see each purchase, leisure expense, or household bill as a whole rather than as singular amounts that seem small on their own. This is important for everyone, no matter how wealthy you may be. A financial advisor can help you understand how to create a budget that syncs with your lifestyle.

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What Is Cash Flow?

Cash flow is just like it sounds — it’s the flowing of money into and out of your financial accounts. Inflows are money received, such as salary, investments, and business profits, and outflows are dollars you spend on household bills, personal or family debts, and personal or family leisurely activities, such as vacations or gifts. The resulting funds — your inflows minus your outflows — gives you your cash flow status: a positive cash flow means you’re bringing in more money than you’re spending, whereas a negative cash flow means just the opposite.

What Is a Cash Flow Budget?

A cash flow budget projects the amount of income you expect over a certain time period, usually monthly or annually, and offsets that amount by the expenses you expect during the period. 

By creating a cash flow budget annually, for instance, you can see the times of year you’re likely to have more money coming in than going out and vice versa — when you might experience cash shortfalls. Knowing this information in advance helps you plan your spending, investing, and saving decisions wisely so you’re in control of your financial future.

Why Plan Out Your Cash Flow?

Planning your cash flow helps you to:

  • Track spending habits
  • Avoid overspending
  • Plan for unexpected expenses
  • Reach financial goals

When you track your cash flow, your goals come into much sharper focus.

Creating Your Personal Cash Flow Plan

Your personal advisor can walk you through your own personal cash flow budgeting plan. They’ll likely help you plan by:

Deciding the time frame

Most people prefer to create a monthly budget, as it offers a clear picture of their financial situation over a shorter period of time and helps them not be surprised by shortfalls. However, some people prefer to create a yearly budget because it provides a more long-term perspective. The time frame you choose should be the one that works best for your lifestyle.

Estimate your cash inflow for the period

Include your salary, bonuses, and any other sources of income. Be sure to account for all sources of income, including side hustles like online gigs, food delivery, or other freelance jobs, plus rental properties and other investments.

Estimate your cash outflow

Include your typical expected expenses, such as housing, utilities, transportation, food, and entertainment, but don’t forget any potential irregular expenses, such as insurance premiums, holiday gifts, and home or auto repairs.

Determine cash flow budget

Now, you can determine your cash flow budget by subtracting your expenses from your income.

How To Leverage Your Cash Flow Budget

Having a cash flow budget in place is just the first step to effective financial management. Here are some ways to leverage your budget:

  • Monitor your budget regularly: Reviewing your budget regularly ensures you’re staying on track and helps you identify any changes in your spending habits or net cash flow and make adjustments accordingly.
  • Adjust your budget as needed: A budget is a living document, and you might need to make changes to it here and there as your financial situation changes. For example, if you receive a raise, start a new business, or sell valuable assets, you may need to adjust your budget to reflect your new income or added costs.
  • Save for emergencies: One of the benefits of having a positive cash flow is that you can set aside money for emergencies. This will help you stay on track, even if you face unexpected expenses.
  • Invest in your future: Whether it’s planning for your retirement, a college fund for your children, or a real estate investment, having a positive cash flow will allow you to make these investments and achieve your long-term financial goals.

How Churchill Management Group Can Help You Aim To Maintain a Positive Cash Flow

Churchill Management understands the importance of developing a healthy cash flow for your lifestyle and goals. . Our team of financial advisors is here to help you create a personalized cash flow plan that considers your income, capital assets, expenses, and both short-term and long-term financial goals. We also provide ongoing support, so you can adjust your cash flow plan as your financial situation changes over time.By working with Churchill Management Group, you can aim to maintain a positive cash flow, reach your financial goals, and take control of your financial future. Please contact us to request a complimentary review of your portfolio, arrange to meet with a Churchill Management Group team member at any of our locations, and start planning your cash flow budget today.

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