investing

6 financial formulas to help you succeed

Formula No. 1: Calculate your cash flow
Income – Expenses = Cash flow

This straightforward financial formula is key to your success.

Subtract your expenses from your income to get your cash flow. "This calculation is going to help you understand your true living expenses," Golden says.

A negative cash flow means you're spending more than you bring in. This may deplete your savings or increase your debt. A positive cash flow indicates that you're living within your means. If the result is a negative cash flow, you can take steps to reduce your expenses or seek additional sources of income.

"Knowing if there is potential leftover income could be helpful in terms of thinking about extra savings you can make to grow a nest egg," says Golden. "What I've come to discover is that people who do not have a good sense of their cash flow underestimate their ability to save."

To get the most accurate picture of your expenses, calculate your cash flow over a number of months and don't forget to include occasional expenses such as property taxes, auto insurance and vacations, as well as unscheduled (but not unexpected) expenses like that co-pay for the doctor or that shower present for your co-worker.

advertisement

Show Bankrate's community sharing policy
          Connect with us
advertisement
advertisement

CDs and Investment

Can heirs cash an old trust?

Dear Dr. Don, The youngest of 6 children, I am 48 years old. My father joined the Navy at 22. In Italy, he met his bride and my mother, and returned to the U.S. to raise our family. In 1959, he bought a trust certificate... Read more

advertisement

Blog

Stephen Pounds

Brexit may hurt US exports, help interest rates

Voters in the United Kingdom have approved a referendum to leave the 28-nation European Union in a move that is sure to disrupt markets today and possibly longer.  ... Read more


Connect with us