Cash flow

Cash flow counts what moved. A paycheck deposited is money in; rent, groceries and a card purchase are money out. The difference over the period is the net cash flow, the figure the term usually means.

A transfer between two of a household's own accounts is neither. Moving $500 from checking to savings changes where the money sits, not how much there is, and paying a credit card bill settles purchases that already counted as money out when they were made.

Cash flow and net worth answer different questions. Net worth is a balance on one date: assets minus debts. Cash flow is a flow between two dates. The two can move in opposite directions in the same month, because net worth also moves with prices: a brokerage account or a home can lose value without a dollar leaving.

In one month a household takes in $6,000 and spends $4,800. Its cash flow for the month is a positive $1,200.

In the same month the market falls and the household's brokerage account is worth $3,500 less at the end of the month than at the start. Nothing was sold. Its net worth moved by the $1,200 of cash kept minus the $3,500 of value lost: a drop of $2,300, in a month of positive cash flow.

Money in

$6,000

Money out

− $4,800

Net cash flow

$1,200

Market loss, brokerage

− $3,500

Change in net worth

− $2,300

Cash flow is the part of a month's change that earning and spending account for. The $1,200 kept in the example came from what was earned and what was spent; the $3,500 came from prices, which no spending line touches. Read apart, the two figures say which one moved.

Over time, kept cash flow is what funds savings and investments. A month with negative cash flow is paid for from somewhere: a balance drawn down, or a card balance carried.

Taiga Finance's Cash flow report draws income against spending for every month, quarter or year of the transaction history, with a line for the net through the columns; the period in progress is drawn faded. For the selected period it gives four figures: “Income”, everything in the Income category; “Expenses”, every other settled transaction outside Transfers, with refunds subtracted; “Net cash flow”, income minus expenses; and “Savings rate”, the net as a share of income, which reads “—” in a period with no income. Hovering a figure compares it with the “Previous” period and with “Typical”, the average of the completed periods in the range.

Under the chart, the period's “Income” and “Expenses” bands list where the money came from and went, by “Category”, “Group” or “Merchant”, each row with its share and its amount. “In this window” names the “Highest” and “Lowest” net periods in the range. A transfer between the household's own accounts, a card payment included, counts on neither side.

The Cash Flow Sankey draws one period as a flow: one block per income category on the left, one per spending group on the right, and the difference as “Net saved”. When spending exceeds income, a “Savings drawdown” block appears on the left instead. Net worth is a separate figure, on the Accounts page as “Position”; the cash flow report reads transactions, not balances.