Whether you're starting or operating your own business or just managing your household finances, understanding and calculating your expected cash flow is critical to your financial health. A positive cash flow indicates that you're earning more than you're spending, while a negative cash flow means you're spending beyond what you earn. Whether positive or negative, calculating your expected cash flow allows you to anticipate future needs and prepare to meet them. It also exposes weak spots in your budget that may be breaking the bank.

Things You Will Need

  • Calculator

  • Notepad

  • Pen or pencil

  • Computer with spreadsheet software (optional)

Create a spreadsheet that lists each of your monthly expenses in the first column and indicates each of the months you're calculating your expected cash flow for at the top of the following columns. At the bottom of your expenses list, create a "Total Expenses" row, and set each column's entry to total the indicated month's expenses. (If you don't have access to a computer, you can draw the same chart on a piece of paper and use a calculator to total the results.)

Enter the expenses that you anticipate for each month in the appropriate cells. To ensure an accurate result, be sure to include every expense that you anticipate, even if it's small. Once you've entered all your expenses, total each column's entry on the line marked "Total Expenses."

Skip a row in each column and label the following row, "Total Income." Then enter your anticipated total income for each month in the appropriate column cells.

Subtract your anticipated total expenses from your anticipated total income in each column. In the months when the resulting number is greater than zero, your cash flow is positive, indicating cash remaining at the end of that month. If the result in a column is less than zero, you anticipate spending more than you earn that month. A positive cash flow trend means your earnings will be sufficient for all your expenses; a consistently negative trend may indicate financial problems in your future.