cash flow
Also called: cash flow
The difference between money coming in and money going out in one period.
What it means
Cash flow is a record of money coming in and going out in a certain period. In family finance, cash flow shows where money comes from and where it goes each month. Cash flow differs from wealth because it only looks at the movement of money, not the value of assets. Cash flow can be calculated simply from the difference between income and all expenses.
Why it matters for families
Cash flow is the basis for assessing whether a family lives below, exactly at, or above its means. Without monitoring cash flow, a family may feel safe because the balance looks large even though bills have not been paid. The concrete result is that decisions such as taking on a new installment become too bold. Healthy cash flow allows savings and an emergency fund to grow.
Example
For example, income is Rp8 million and total expenses are Rp7.2 million in a month, so cash flow is positive at Rp800 thousand. That money is allocated to the emergency fund and other goals. If the next month's expenses rise to Rp8.5 million, cash flow becomes negative and needs to be fixed.
Common misunderstanding
Many people think cash flow is the same as the account balance. The correction is that the balance can be large because the money has not been used yet, while cash flow shows whether income is truly enough to cover expenses.