Five: Check in on cash flow

Discussion
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Cash flow and budgeting

At the most basic level, cash flow gives you a sense for “what’s left over.” Your planned cash flow is your expected income minus your expected expenses. Your actual or net cash flow is your actual income minus your actual expenses. You can read more about why cash flow is important here on the blog, but the big takeaway is that it’s a helpful indicator of how well your overall budget plan is working vs how well you’re actually sticking to it.

Some transactions that are actually more like transfers (e.g. a mortgage payment or transfer to an IRA) can affect your planned cash flow depending on the “Type” (Income/expense/transfer) assigned to the category you use for these. Many people choose to use an “expense” type category for the outgoing (negative) side of these transactions and set a budget target on the Categories sheet for them. This method helps you make sure that amount is available to set aside each month.

If you budget in this way you can view the Planned Cash Flow amount on the Monthly Budget sheet as truly what should be left over after you’ve saved money and paid the bills. Ideally, you want your Planned Cash Flow to be a positive amount. If you prefer to allocate all your expected earnings in a month to a category (zero sum budgeting) ideally some of it is being allocated to savings or an emergency fund in the event that you need to cover an unexpected expense.

The actual cash flow is then your score card at the end of the month on what was actually left over, or extra savings. It gives you a sense for how well you stuck to your budget. For zero sum budgeting, the actual will probably be $0 and you can use your savings “expense” actuals in the budget sheet as your scorecard.

This is how we think about cash flow at Tiller Money and we try to keep it simple, but there are other ways to think about it and track it. We recommend keeping it simple and as you progress you can decide if another method will work better for you.

Brainstorming

When you’re reviewing your budget and cash flow to see how your budget plan is working for your situation use these questions to help you make observations.

  • What group has the most budget allocated it? Use the % calculation for each group row on the Monthly Budget sheet to easily find out.
  • For categories in this group, are there any that may be contributing to a negative cash flow plan that you can cut this month?
  • If you have a very positive cash flow plan, could you put some more money toward debt, savings, or some other category that will help you achieve one of your goals?
  • Look back at last month’s budget and review your actuals. Is there a category where you had a lot of available money left (look at the Available column on the Monthly Budget sheet)? If so, could you reduce the budget for that category to make your planned cash flow more favorable?

Example observations

As you review your planned cash flow based on the budgets you set in the last segment you may make some interesting observations.

I’ve noticed that a steep budget target for subscriptions that I set based on my actuals could be reduced and help me increase my planned cash flow.

I think my negative cash flow is coming from too much being allocated to stuff to entertain the kids.

I lost my job so my planned cash flow is negative right now, but if I cut out all discretionary spending I can get it to $0 and just cover my necessities.

Your turn to share!

What did you learn about how your budget is affecting your planned cash flow? What changes can you make that will help you achieve your #1 goal or better align your spending with your values?

Click “reply” below to share.

Resources & Support

Resources

Here are a few guides you may find useful as you work through the checklist for this segment:

Getting support

If you need help with completing any of the checklist items, including addressing account connection issues and errors, please reach out to our support team via the chat tool in the lower right corner of the Console at https://sheets.tillerhq.com/auth/google for the fastest response. The topics here are intended to be motivational, not for troubleshooting and the team via Chat can help you faster and more effectively than anyone here in the community.

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We have overall been saving money during this time because we go out less and travel less which has reduced our expenses. We are using this as an opportunity to save and invest.

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With my new year budget I have a good bit of wiggle room (positive planned cash flow number) even after including more in my budget toward wellness categories :slight_smile:

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I have just moved over to the Foundation Template, and am excited to use the Cash Flow figures.
I think I have a good grasp on how to use the Planned Cash Flow figure. For example: at the start of each month, we review our budgeted amounts for that month and make any adjustments we know are necessary. A positive Planned Cash Flow figure tells us that, as long as we stick to the budget, we’ll have that much money left at the end of the month. Got it…make sense.
I’m trying to figure out how to then use the Actual Cash Flow figure throughout the month. I understand at the END of the month, comparing it to the Planned Cash Flow amount tells us how well we stuck to the budget. But is it useful as a “check in” on, let’s say, the 11th of the month? Since the Actuals are constantly moving throughout the month (e.g. paycheck on the 15th boosts it back up…a flood of scheduled, recurring expenses on the 22nd and 23rd drops it back down), maybe I shouldn’t think to use it to see how we’re doing as the month progresses?

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Hi @amiller72, while not necessarily applicable to the challenge prompts, I’ll answer here anyway.

You’re right in that the cash flow to date (actual cashflow) amount on the Monthly Budget sheet isn’t going to be super insightful throughout the month. It’s definitely most useful after the month closes out. I like to pay attention to the spending budget vs actual spending section in the middle that shows me x% of my budget remaining against how many days are left in the period as well as the graphical comparison between the budgeted amount and the actual amount to get a quick insight on how I’m doing with my spending this month.