Understanding cash flow

Find out why your cash flow could be the secret to better budgeting.

Was getting your finances under control one of your New Year’s resolutions? Has it already started to go off the rails? There’s definitely still time to get back on track.

Looking first at your cash flow, and what you’re actually spending your money on, could help you manage your finances more effectively, so you can successfully save up for that holiday, home or have some cash set aside for unexpected events.

So what exactly is cash flow?

Cash flow is a way of measuring how much money is coming into your account and the amount that’s going out at any time. Your cash flow is made up of three key components:

  • Income includes your salary/wages and/or pension payment, as well as interest from savings accounts, dividends from investments and capital gains from the sale of assets.
  • Expenses can be fixed or ongoing, such as your rent or home loan payments, utility bills and insurance and one-off or discretionary expenses, such as groceries, entertainment and clothing.
  • Savings is what you have left over after expenses are subtracted from your income. If your expenses are more than your income, you’ll have a negative cash flow.

Try AMP’s new Money Manager tool for an easy way to check out your cash flow. This automatic service allows you to see your AMP and non-AMP accounts in the one place, giving you a bird’s eye view of your finances.

Better budgeting

Once you have an overview of your personal cash flow you can start to develop a budget (or improve an existing one). An effective budget can go a long way towards helping you to achieve your goals.

If your cash flow is negative, or you’d like to see your savings increase, you’ll need to look at your expenses and see where adjustments can be made. Adjustments could be as simple as reducing your grocery bills or the amount you spend on dining out. However, depending on your goals, you may need to consider making a larger change. For example, finding a cheaper place to live or cutting down on transport costs. 

Our budget planner calculator is a handy tool to help you work out how much you need to put aside to pay bills and how much you could have left over to spend or save.

Don’t forget to also look at the income component of your cash flow. Reviewing your income sources can enable you to identify ways to get your money working harder for you. For example, think about whether you could be getting a higher interest rate on your savings account, a better return on your investments, or even earning more money with a second job or side project.

Reviewing your cash flow will give you a great overview of where you currently sit financially. With this knowledge you’ll have more control to budget smarter, better manage your money and help reach your financial goals.

Need more help?

Check out our Managing your money online learning module for saving tips and to help with tracking your spending. An AMP Bett3r account can also help you manage your money, save more and take control of your finances.

If you need further assistance, speak to your financial adviser. If you don’t have one, call us on 131 267 or use our find an adviser tool.

Explore your goals

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Managing your money

Find out how you can make a big difference to the opportunities and lifestyle you enjoy today and tomorrow with our online module. 

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Budget planner calculator

Use our Budget planner calculator to assess your current financial position and how much you may be able to invest. 

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Any advice in this page is general in nature and is provided by AMP Life Limited ABN 84 079 300 379 (AMP Life). The advice does not take into account your personal objectives, financial situation or needs. Therefore, before acting on this advice, you should consider the appropriateness of this advice having regard to those matters. AMP Bett3r Account is issued by AMP Bank Limited ABN 15 081 596 009, AFSL 234517. Consider the terms and conditions available on request by calling 13 30 30 or at amp.com.au/bett3r and whether this product is appropriate for you. Fees and charges apply.

Although the information is from sources considered reliable, AMP does not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any decision. Except where liability cannot be excluded, AMP does not accept any liability for any resulting loss or damage.