Skip to content
Download Consolidated Credit's Free Debt Relief Guide

Budgeting Not Working? Try Managing Your Cash Flow Instead

Have you ever checked your bank account after a month of careful spending only to be disappointed by the number on the screen? Sometimes, simply following a budget plan isn’t the most effective solution. It doesn’t always help in improving your overall financial health. Sure, you always pay your bills on time, but when that month is over there’s hardly anything left to show for it. This can all change by switching to managing your cash flow instead.

What is cash flow?

Simply put, cash flow is the amount of cash you are receiving minus your cash expenses. This is calculated over a designated period of time. Most often on a monthly basis. This can also be done on a larger scale, such as annually or bi-annually. Doing so gives individuals a look at the bigger picture of their spending habits. 

By calculating cash flow, you can discern whether you have positive or negative cash flow. The former means your income is higher than your expenses and vice versa.

How cash flow differs from budgeting

There’s one main difference between cash flow management and basic budgeting. Incorporating a cash flow budget aims to create a surplus in cash for you to use towards goals or savings. Whereas using a budget helps ensure you don’t overspend what you have.

Benefits of focusing on cash flow

Gauge your financial stability

Knowing exactly where your money is coming from and going prevents the stress of being sidelined by poor financial habits. Part of financial health is feeling comfortable spending on things and experiences that you enjoy. Unlike budgeting, cash flow analysis makes this possible over time.

Be prepared for sudden expenses

A lot of people experience unexpected hardship that leaves them with less money than they are used to or expect. The most common being experiencing a layoff, a recession, or a medical emergency. When you’re living paycheck to paycheck, dealing with these sorts of setbacks can leave you feeling helpless. You may even have to rely on loans for a period of time. Without a safety net for these situations, it can take a long time to come back from that debt. Focusing on cash flow will not only keep you from going into debt but is also helpful in setting aside an emergency fund for times like these.

Track changes in economy and spending habits

Even if you put your money towards the exact same things each month your cash balance would be different today than it was when you started budgeting. At the rate inflation is climbing these days, budgets need to be adjusted frequently to fit economic shifts. Tracking by way of cash flow makes it easier to adjust for these changes while still ending the month with a surplus.

Long-term goals

Ultimately, the main benefit of including cash flow in your financial plans is its innate ability to help achieve long-term goals. It makes consistent savings possible in a way you’ve previously only dreamed of.

How to calculate cash flow

When calculating your net cash flow, the first task is to make two lists. The first is of all the ways money flows into your accounts (also referred to as cash inflows). The second of all the ways it flows out (or, cash outflows). Once completed, it’s as easy as subtracting your outflows from your inflows.

Be mindful of the timing of cash inflows and outflows. This is a key aspect of successful cash flow tracking. A budget usually doesn’t consider timing. Knowing when money is going in and out of your account can go a long way to maximizing your accounts, by avoiding late fees or taking advantage of the greatest savings opportunities.

How to improve cash flow when it isn’t where you want it to be?

One way to improve your cash flow is to find ways to increase your inflow. For many, it is quite possible that you’re being underpaid. Sadly, this has become common practice in many industries. This can make it hard to go out there and get what you deserve. There are many ways to recognize whether you’re not being paid what you should, and actions you can take. If making efforts to earn what you deserve in your current job doesn’t work, another way to make more is to brush up on some new skills. Doing so is known to be helpful in landing higher-paying positions. 

The reverse, but just as effective, option would be to reduce your outflow. This can be done by discerning between your essential and non-essential expenses. The best place to look for where to adjust is non-essential expenses. Often these have inconsistent spending patterns and are easy to overspend on, for example, eating out. Other good examples are recurring costs that go unused such as gym memberships and streaming services. With all those items listed together, you can easily spot where you might be willing to cut back.

Final Thoughts

Now you know what cash flow is and how it can be used to improve the quality of your life and spending habits. Use it to enhance your financial plan and make it even more efficient. If you are still struggling with managing your cash flow because of debt, feel free to reach out to one of our many trained experts. We can set you on the path to debt relief.

Was this article helpful?

What is your total credit card debt amount?

Provide a few details about yourself.

##first_name##, here are your next steps...

Get a clear picture of your spending vs. your income. Begin your online budget and financial analysis now by clicking the button above.

Our experts are here to help you understand your options and reach your goals. After you complete the easy-to-use online budget, one of our trained counsellors will reach out to you and provide recommendations.

Everything shared is 100% confidential and secure.

I understand and agree that by choosing “Start your online budget now”, I am voluntarily providing certain personal financial information in order to educate myself as to my current financial position. I understand that this budget tool is educational in nature, and that none of the information received in the form of a budget constitutes financial advice, nor does it constitute a counselling session. I understand and agree that the budget depends on the information I input into the fields, and that Company does not represent or guarantee the accuracy of the budget. I understand that this tool may collect information and should I choose not to provide such information, I am not to proceed further. If I choose to abandon the tool midway through the process, I understand that the information will not be maintained and I would be required to start providing the information from the beginning. Company disclaims all warranties associated with the budget tool herein. I understand and agree that Company may use the contact information provided herein to contact me through various means of communications, including automated messages, and that I expressly consent to receive these messages.

Consolidated Credit Counseling Services of Canada Inc BBB accredited business profile