Cash Flow Budgeting

One important personal fincance key metrics in our personal finance is Cash Flow.

What is cash flow? Why do we need to know this? How can we manage it?

Cash flow is the net amount of cash and cash-equivalent coming in and out of our accounts. It may be to and from our wallet, pocket, banks, or even online payment methods.

Those coming in to us are called income while outwards are called expenses.

We always hear! Yeyy Payday!

Followed by Bill and Judith saying “Hello. Can I have your money?”

It usually feels like cash is only flowing outwards. Thus, it is imperative to budget our expenses.

Best if we can monitor them through expense tracker or Cash Heaven Tracker so we’ll know where we can improve our cash flow.

Well to be fair, it seems like we only have one stream flowing in. With all the 19 different types of expenses and only 7 income streams, it will really feel like cash is being drained if expenses are not managed properly.

For cash to come in, we have to earn them through any of the 7 income streams. 

Sometimes, there is a delay for the earned cash coming in. They are our accounts receivable. They are only considered in our cash flow as income once we are able to successfully collect them. But for our personal bookkeeping, we can add them in the Accounts Receivable.

I haven’t personally experienced being paid for my service in accounts receivable such as a note or cheque, but in case you experience this, DEBIT Accounts Receivable and CREDIT Earned Income for example.

For the expenses section, we record the expense dated on the day we incurred it regardless whether it was paid by credit, cash or its cash-equivalent. It is a best practice to do this so we won’t underestimate our expenses and this will be better for our personal bookkeeping.

Since most personal expense trackers use a single entry method to track cash movements, it is difficult to track and make wise decisions on our liabilities. This is the biggest factor why I incorporated the double entry method in my personal finance management.

For our scheduled payments, it’s better to have an alarm or reminder for us not to forget and lapse on our payment. With the help of our current technology, I find it convenient to set-up auto debit for scheduled payments I have.

Why is personal cash flow important? It is for us to know our liquidity, knowing that we can pay any expenses and obligations we’ll have. Having more cash coming in than coming out means that we are in a positive cash flow situation.

Back then when I started to think about my financial plans, I found it hard budgeting. I even caught myself computing how much I will have before the next payday by considering the upcoming expenses such as food and transportation which are incurred daily. Even worse, thinking if I will still have enough money to survive until the next payday.

Can I pay the scheduled payments and upcoming expenses on time? What expenses can I minimize or at least reschedule to still be Cash positive?

I couldn’t stop thinking about it even when doing tasks that I am already focused on. Worst, it even haunts me in my sleep to think if I will still have enough money.

So I thought of ways or practices in budgeting and I find it very helpful to do this with the help of MS Excel or Google sheets. It saves time and can be very accurate even to the last cent. It gives me insights on what to improve such as expenses to minimize. After I started tracking my expenses, I found out what expenses are the culprits in keeping me poor. It is usually the Eating Out.

To compute for our cash flow, here is the formula:

Income – Expenses = Net Cash Flow

When we budget income to meet expenses, it is the cash flow that we are looking into. Our goal is to make sure that we won’t have a negative cash flow at the end of the day.

We plan ahead to make sure that our expenses won’t be more than our income. There will be some sudden expenses or impulse buying, but the goal is to stick to what was planned. These expenses should not be included in our budgeting.

To compute our cash balance, here is the formula:

Beginning Balance + Income – Expenses = Ending Balance

Our Ending Balance will be the Beginning Balance for the next period. Note that it shows us our cash balance. It is not equivalent to our net worth.

To manage our cash flow is budgeting our cash. We will have a better picture on how much we can still spend up to the next payday or add to our savings through daily cash flow budgeting.

It is also good to budget for longer term for us to be prepared to different seasons with different weathers and celebrations. We will also have a better picture on where you are on your way to Cash Heaven. Here is a sample screenshot of a monthly cash flow budgeting.

In projecting our monthly budget, we will have to restructure the computation of our cash flow. For the purpose of our cash flow management metrics, we will be using this formula:

Estimated Recurring Income – Fixed Expenses = Monthly Cash Flow

Estimated Recurring Income are our expected income to receive in the coming months. Make sure the estimations are as conservative as it can be.

If you are working full time, salary is one of your recurring income. Other streams of income are usually not recurring on a fixed amount, and so we will input conservative estimates. Include all those applicable in 7 types of income here.


Fixed Expenses are those that we will surely have to spend our money on. These are unavoidable in nature as these are important for us to survive and function on a normal basis. Some of these are subscriptions that we will need to be productive or for leisure, although we would like to keep our leisure expenses at the most minimal.

Include minimum debt payment expenses required from our loans and all those applicable in 18 types of expenses (excluding the interest expense / fees and charges incurred from time to time in your debt such as credit cards). The logic behind this is we only want to see how much cash will go in and out of our savings. The interest expenses incurred is added to our total debt, but it won’t be cash outflow until we pay the debt in cash.


In order to increase our net cash, we should be looking for more income and/or decreasing expenses.

Having more cash means that we can have flexibility on things we buy and do more things. It will also prevent us from loaning or using our credit cards and not being able to pay on time, leading to more interest expenses.

However, increasing expenses is inevitable. Knowing that our cash in our wallets and banks will always have to catch up with the ever rising expenses, we should always look for how we can make more income streams.

Published by Cash Heaven

Excel Expert and Financial Analyst Excel / Google Sheets / Financial Modelling, Valuation and Analysis Effective communicator / High quality / Affordable / Reliable / Quick Turnover I've successfully completed over 200 financial modelling, valuation and analysis projects with start-up stage and corporate companies over the past 4 years. I love to solve problems, have an eye for design, and have built business excel templates. I fix Excel formulas in 10 minutes.

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