Why you can have positive cash flow and still feel broke

Positive cash flow and feeling broke measure different things, and both can be true in the same month. Cash flow is what the month kept; feeling broke is the checking balance on the days you look at it, and the money the month kept is usually not in checking on those days. It left for savings and for debt principal on payday, the bills clustered in the week before you looked, the card is holding last month's spending until the statement, and the annual costs are set aside somewhere the balance does not show. A household that kept $570 in a month can read $90 in checking on the 14th, and both numbers are correct. The feeling comes from reading the wrong one.

The four places the kept money goes

Each row is money the household has, in the sense that cash flow measures, and does not have, in the sense that a checking balance measures. The first two are the household getting richer; the third is money already spent that has not left yet; the fourth is money already committed. None of them is in checking on the 14th, which is when the balance is read.

A worked month, $570 kept and $90 in the account

Take-home pay is $4,400, arriving on the 1st and the 15th. The month's cash flow is $570.

On the 14th the account reads $90, and the household feels broke. The month's arithmetic is that $300 went to savings on the 1st, $250 went to debt principal on the 1st as an extra payment, and $20 stayed in checking by month end after the card was paid: $570 kept. The $90 is the first paycheck after the first half's bills and two weeks of living, with every kept dollar already somewhere else. See Why your budget never matches your bank balance for the subtraction that reconciles the two readings.

Read net worth for the feeling, and the forecast for the safety

The feeling of being broke is a reading of one account on one day, and it is corrected by reading the number that includes the other three places: net worth. Savings up $300, the loan down $250, the card balance whatever it is, checking at $90; the net of all of it moved by about $570 this month, and that is the household getting richer at the rate the cash flow says. A monthly net worth reading is the cure for a household that saves well and feels poor; see How often to check your net worth, and what to look at.

The safety question is different, and it is answered by the thirty-day forecast: whether the $90 on the 14th is a low point the paycheck rescues or a shortfall that a bill will find first. A forecast that shows the balance staying above zero at its minimum says the month is safe, however thin the 14th feels; see How to forecast your cash flow for the next thirty days.

When the feeling is right

Sometimes the balance is telling the truth: cash flow is positive only because a large annual cost has not landed yet, or because the savings transfer is about to be reversed to cover the card, or because the positive figure is one good month in a run of negative ones. The checks are the same two readings. If net worth is not rising over three months, the cash flow figure is wrong or the months are alternating. If the forecast's minimum is below zero, the month is not safe whatever the cash flow says.

Move the kept money on purpose, and the feeling follows

The feeling improves when the kept money is visible: a savings balance that rises on the 1st by an amount you chose, a loan balance that falls by the extra payment you sent, a sinking fund with a list of what each balance covers. The household that moves its kept money on payday and reads those balances once a month knows what the $90 is. The one that reads only checking sees a thin account and a month that felt like nothing.

1. Move the savings transfer on payday, by automatic transfer, to an account you read once a month.
2. Send the extra debt payment the same day, as a separate payment, so the principal is visible on the statement.
3. Keep the sinking funds in an account with a list of what each balance covers.
4. Read net worth once a month, on the same day, and note the change.
5. Run the thirty-day forecast on the 1st, and read its minimum rather than today's balance.

Common mistakes

• Reading checking as the score. It is one account on one day, after the kept money has left it.
• Reading a thin balance as overspending. The forecast says whether the month is safe; the balance on the 14th does not.
• Cancelling the savings transfer to feel better. The feeling improves for two weeks and the year is $3,600 poorer.
• Counting the card as available. Its balance is last month's spending waiting to leave.
• Never reading net worth. It is the only number that shows the household getting richer while checking stays flat.
• Ignoring the feeling entirely. It is sometimes right, and the two readings say when.

Common questions

Why do I have positive cash flow but no money? Because the kept money left checking on payday, for savings, for debt principal, and for set-asides, and the bills clustered before the day you looked. Cash flow measures what the month kept; the checking balance measures what is left in one account today, after the kept money has gone where you sent it.

How do I know if I'm actually okay? Two readings. Net worth once a month: if it is rising by about the cash flow figure, the household is keeping money. The thirty-day forecast: if the balance's minimum stays above zero, the month is safe. A thin balance on the 14th with both readings good is a household saving well.

Should I keep more in checking so it feels better? A cushion of a month of bills, built once, removes the 14th's thinness and the timing stress with it. Beyond that, money in checking is money not saving or not paying down debt, and the feeling is better addressed by reading net worth.

What if my cash flow is positive but my net worth isn't rising? Then the cash flow figure has a transfer or a card payment hiding in it, or the months alternate and this one was a good one. Recompute the cash flow with transfers and card payments removed, and read three months of net worth rather than one.

Does paying off debt count as money kept? The principal portion of every payment does, and it is one of the four places the kept money goes. A household paying $250 extra toward a loan each month has $250 a month that checking never shows and net worth always does.

How Zypper handles this

Zypper shows all four places on one page. Net worth is computed from every account, checking and savings, the cards and the loans, and charted over time, so the month's kept money appears as the line rising while checking stays flat; the cash flow page charts income against spending for the month with transfers between your own accounts left out, which is the $570 figure. On the budget page, bills count as money already spoken for in the month they are due, and the pace chart shows cumulative spending against a guide that steps up by each bill on its date, which is the shape of the first two weeks. Sinking funds are categories carrying their balances forward, with the carried balance shown beside the amount. See Net worth tracking, Cash flow, and Tracking your spending pace for the details, or get started with Zypper to see where the kept money went.