The bottom line

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Everyone’s situation is different. But the bottom line is that you have to make more than you spend. I like to look at cash flow on a month to month basis. Simply total your expenses and subtract them from your income for the month. You should end up with a positive number. This formula does not include any income automatically diverted to a retirement account. Sometimes a big repair bill or healthcare expenses will give you a negative number for the month. Generally, there are two options to make a positive number next month. Find a way to bring in more money, or cut expenses. I find it easier to cut expenses, but you can sometimes work extra hours or sell something of value to achieve the same result. It’s never fun cutting back on expenses. But, if the price of everything keeps going up, and your income stays the same, you need to do something to maintain a positive cash flow.

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