QandAs: Legal

What is Cash Flow?

Answer:
Cash flow refers to the amount of money that

comes in and goes out of your personal or business account during a specific period of time. Take your personal, monthly cash flow for example. Say you earn $5,000 a month at your job.

From that subtract all your expenses, such as your mortgage, car payment, food, eating out, entertainment and credit card bills, anything that you spend money on. If your expenses total $4,500, you have a $500 positive cash flow each month. On the other hand, if your expenses total $5,200, you have a negative cash flow of $200 each month and that extra money has to come from somewhere. Most people with a negative cash flow are charging the difference on credit cards or lines of credit, or pulling money out of other investments such as savings accounts to pay for everyday expenses.