Understanding Your Personal Cash Flow



One key principle in financial literacy is understanding your personal cash flow.  

Cash flow refers to the movement of money in and out of your personal finances. Understanding your cash flow means clearly understanding your income, expenses, and the difference between the two. 

This step is vital because it helps you to understand how much money is coming in, how much is going out, and whether you are spending more than you're making. If you're spending more than you're making, it can lead to financial difficulties in reaching your objectives. However, if you have a positive cash flow, it means you have extra money each month that you can use to pay off debt, save, or invest. 

To understand your cash flow, you should track your income and expenses for a certain period of time, such as a month. This is usually done in the form of a budget. By regularly checking your cash flow, you can make educated decisions about managing your money and achieving your financial goals.


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