Lesson 1 of 10
Cash flow: timing matters
A positive monthly budget can still contain a week when cash runs short.
The idea
Cash flow records when money enters and leaves an account. A monthly total answers whether income exceeds spending; a dated cash-flow plan answers whether money is available when a bill is due.
Start a period with the available balance, add income when it arrives, subtract expenses when they are paid, and carry the ending balance into the next period. Separate a future payment from money already received.
Worked example
Illustration: You start week 1 with $300. A $1,200 bill is due before a $1,500 paycheck arrives in week 2. The two-week total is positive, but week 1 has a $900 timing gap. A plan must address the due date or available cash; a positive final total does not remove that gap.
| Period | Starting cash | Income | Expenses | Ending cash |
|---|---|---|---|---|
| Week 1 | $300 | $0 | $1,200 | −$900 |
| Week 2 | −$900 | $1,500 | $0 | $600 |
A common mistake
Counting an expected paycheck as available cash before its deposit date.
Try it yourself
You start with $500, receive $800, and pay $950 in week 1. In week 2, you receive $0 and pay $400. Calculate both ending balances and identify the first shortfall.
Show the worked answer
Week 1 ends at $350. Week 2 ends at −$50. The first shortfall occurs in week 2.