Step 3: Balance Income & Expenses

How does your cash flow?

Goal: Match income with expenses

If income > expenses, save more!

If expenses > income, make changes

Matching income with expenses is the step that many people don’t make time for, but it’s important to do if you wish to make the most of your resources and achieve your goals.

Based on this analysis, make adjustments as necessary to your spending and savings habits.

Remember: Savings is an expense category. As you get expenses under control, and as income increases, put more money into savings vehicles!

By tracking where your money goes and comparing income with expenses, you can identify spending problems and make adjustments (either increase income or reduce expenses).

Again- “Savings” should be considered a regular expense. Get into the habit of regularly saving part of each paycheck.

There are many other expenses that you can include on a cash-flow statement; the more detailed, the better. The above image is only a sample to get you started.

HINT: If you don’t keep good records, you may have to estimate how much you spend in each category. Estimate expenses on the high side, and income on the low side—until you set up a tracking system that gives a more accurate picture.