Where did it come from? Where did it go?
cash flow
This is coming out a day earlier than usual in case you want to start tracking cash flow with the start of the month.
I was listening to a podcast last weekend in which Ramit Sethi was interviewed about his new book, Money for Couples (on my reading list for 2025). He said that 50% of couples he’s worked with don't know their household income.
That’s a bit crazy. But when I asked my husband, he didn’t know ours.
Knowing how much money is coming in and from where, as well as how much money is going out and to where, is called cash flow. A clear understanding of your cash flow is one of the first things to tackle in financial planning. It’s important because you want to
make sure you have enough to get by. Maybe you feel like you never have enough. Seeing everything laid out is the first step to understanding why. Is it your income? Your expenses?
identify opportunities. Do you have a lot of cash left over at the end of the month that could be used to pay off debt or invest? What things are you spending the most on? Are they important to you?
start to inform financial decision-making. Maybe seeing that your side job is making more money than you thought spurs you to spend more time on it. Perhaps you have a big purchase that will have a monthly payment, but looking at your cash flow, something will have to change for you to be able to afford it. Sometimes, lenders or other financial institutions will use it to help them make a financial decision (we had to fill out a monthly expense report for our first-time home buyer program).
Where did it come from?
In 2024, $61,308 hit our accounts. That’s paychecks after health insurance, taxes, and other deductions were removed. Insurance payouts. High-yield savings account interest and a bank bonus. 75% of our income came from my husband’s salary.
Over the course of the year, we spent $2990 more than we made.
Where did that go?
$19,606 in housing (rent, utilities, etc.)
$15,573 on kids (most of which was childcare, but also includes over $1000 in diapers/wipes and the cost of other supplies, clothes, and the like)
$10,548 in food (groceries, restaurants)
$7,236 on health care (not including the premiums taken out of paychecks)
$3,621 on our cars (from the registration to insurance to gas)
$1,250 on pets
$1,309 on travel
Add a new phone and some personal fun stuff (like new books for book club when the library didn’t have a copy), and that about covers it.
What did that look like?
May was a 3x paycheck month for my husband, an insurance payout, and I paid a $2000 hospital bill. In September and October, I finished paying the hospital bills making expenses higher. We spent the better part of July traveling, which meant more spending and less earning on my end. Daycare tuition is debited weekly, so some months, there are four charges, others five.
What should it look like for you?
That is something you have to ask yourself. The rule of thumb is to spend less than you earn, but like any good rule of thumb, it doesn't always work. In 2024, we made less because I was home with a new baby. That was part of the plan.
Throughout your life, there will be times when you spend more than you make—think taking on student loans or a mortgage. You may be spending from retirement assets. Other times, you make more than you spend and save (or invest) the difference.
The first step in knowing is figuring out what it looks like for you right now:
If you already have a handle on your cash flow…
…review what it looked like in the past year. Was there a trend? Looking back, how does it make you feel? Is there anything you want to think about changing?
If you want to start understanding your cash flow and have five minutes…
…and primarily use a checking account to pay your bills; look at the bottom of your checking account statement. It should show the total deposits and withdrawals, which is your cash flow (out of this account).
Don’t know your income? Take a few minutes to review your latest pay stub, social security statement, etc.
If you want to get a more detailed picture of your cash flow and have an hour or two…
…take the time to set up a system to track cash flow, with the goal of doing so for at least the next month. I strongly encourage you to use an app if you are comfortable, especially if you regularly use credit or debit cards to pay for most of your expenses. Alternatively, you can write down your different transactions on a note on your phone or a good old-fashioned sheet of paper. Include where, what, and how much the purchase was. Consider leaving a memo explaining why you made that transaction.
This isn’t about creating a budget, judging the flow of your money, or changing anything. It is about gathering information. While a detailed accounting of every transaction is not needed or wanted for everyone in perpetuity, it is helpful to check in at least once in a while to account for the coming and going of your money.
Keeping track of every transaction for a month may seem overwhelming. Last month, our household had 106 transactions. Whether you take it day by day or a few days at a time, it takes five minutes to review transactions aggregated with an app. It takes even less time to write them down as they occur!
Over the years, we have used various tracking methods, from spreadsheets to apps. For the past few years, we have been using YNAB (which stands for You Need a Budget). This method has worked well for us, but it’s really about what works for you. I know people who love Monarch Money and those that recommend Empower.