Cash Flow

Determining your budget is not always easy. You can use a template such as the one that appears here to make your list. You should start your budget using monthly expenses. You will ultimately want to annualize these expenses so that you can project them out to the end of the plan at your age 90 or 95.

One way to calculate your expenses is to review your check book. Make a spreadsheet of all your expenses in the checkbook and compare them from month to month. This will help you get a better idea of how much you will most likely spend over the course of a year for each category.

Or you can think about your expenses systematically. Start with housing expenses. How much is rent or the mortgage? How much is home owner's insurance? How much are utilities? Think of all of the expenses that you pay that are assocated with your housing.

List other categories such as food, auto, entertainment, personal expenses, other insurances, taxes, etc. Try to be as complete and detailed as possible. When completed, subtact your expenses from your income. Unless you are very organized, you might find that something is not right. You may have understated or overstated your expenses resulting in a cash flow surplus or deficit.

Think logically about this. How much money do you have left at the end of the month. If you do have money leftover, then you do have a surplus. If you are routinely using credit cards and expanding your debt on a monthly basis, you then probably have a cash flow deficit that you will need to address.