What is a Cash Flow Chart?
A cash flow chart is a simple, yet powerful tool for visualizing your monthly cash flow. In this case, cash flow goes beyond the traditional definition of cash flow. Instead, I’m using cash flow where your cash is flowing.
It is a flow chart of major expenses beginning from gross income and ending in monthly cash flow. Types of expenses include pre-tax deductions, post-tax deductions, monthly living expenses, debt payments, savings and of course remaining positive or negative cash flow.
In building this tool I realized the power of visualizing exactly where your cash is flowing and at what point in it’s life cycle.
While the cash flow chart, doesn’t resemble a common spreadsheet it is built in google sheets and compatible with Microsoft Excel and open office. It includes formulas to automatically sum each category and compute the percentages of cash flowing to each category.
Why I Built the Cash Flow Chart.
The truth is I enjoy using each of these tools for their own purposes. However I wanted to see the entire picture of my cash flow starting from gross income. I also appreciate the power of data visualizations and was inspired to create a flow chart of cash flow.
I began drawing the flow chart in Google Drawings, however I decided the diagram needed to be interactive and perform basic calculations. Using Google Sheets I was able to create an interactive flow chart that updated as new data was added.
I found the process of building the flow chart and resulting tool very useful.
To build the flow chart I had to look very closely at our payroll stubs. Embarrassingly, we uncovered some savings that we had completely forgot about and wasn’t being tracked in any of the online tools mentioned above. I also needed to define the major categories of expenses and gather our spending data for each. I used Personal Capital and True Bill. True Bill is a fantastic resource for identifying recurring monthly expenses.
Where (and When) is your Money Going.
I found the resulting chart to be a powerful tool for visualizing our household income, expenses, savings and monthly cash flow. Using the cash flow chart, my wife and I identified that too much of our income was going towards debt payments and have decided to pay off some of our loans and increase our retirement savings.
Another value of the cash flow chart is seeing when your money is moving. You’ve probably heard of the adage “Pay Yourself First“, typically through automatic payroll deductions or recurring bank transfers. This savings technique is nicely visualized in the cash flow chart. You can see how the money is moving before you even have a chance to spend it.
Build Your Own Cash Flow Chart.
You should really take the time to build out your own cash flow chart and please leave comments sharing your experience and providing feedback. I will update the spreadsheet to fix any issues identified or make suggested improvements.
Step 1. Get a Copy
Step 2. Customize
Once you’ve got a copy of the template, you will need to customize it for your own financial situation. This might include adding additional income streams besides monthly payroll. You might also have different expense categories. Certainly you will have different payroll deductions and expense amounts. While this may seem like significant effort, it is worthwhile and actually fun. Think of it as a scavenger hunt through your finances.
Step 3. Take Action
This is the most important step. Once you’ve built out your own Cash Flow Chart. Take action. This might include sharing it with a significant other or personal financial planner. Determine where your cash is flowing and make any desired changes to improve cash flow. Common strategies are pushing your saving higher up the chart aka paying yourself first.
Step 4. Leave Feedback
Help us to improve the cash flow chart by leaving comments below. I’ll fix any bugs or add additional features based on feedback.