The first step in organizing your finances is to determine what it is you’d like to accomplish. You can read about Setting Goals and Keeping Goals in previous posts. After your goals are set, if you want to organize your finances, take a look at your cash flow to figure what’s available to fund your goals.

Cash Management Analysis

The 3 steps to get you started are:

  1. Figure out how much you are spending.
  2. Figure out how much you earn and pay in taxes.
  3. Subtract your expenses and taxes from your income for your discretionary income.
This analysis does two things:
  1. It brings awareness to your spending habits, your taxes, and your income AND
  2. It allows you to spend consciously.

In other words, when you are faced with a decision to a buy new or used car, or bigger home, or even just to add a monthly cable bill to your expenses, you can do so consciously because you know exactly how it’ll impact your cash flow. So let’s explore how to figure your cash flow in a little more detail.


The best way to know where you are spending your money is to import all your credit card and banking transactions for the last 4 months into a FREE online budgeting software. I prefer Once you’ve opened an account and imported your transactions, you can look at trends in spending.  As you get more data, you’ll know how much goes towards food, auto, and housing expenses. This also tells you where you can lower your expenses if needed. If you’re interested, you can compare your spending habits with that of the rest of the country by looking at the latest Consumer Expenditure Survey. Mint does a nice job of suggesting ways to saving money on credit card interest and fees, insurance rates, and others.

Income & Taxes

The best way to do this is to look at Wages from line 1 of your tax return if you’re pre-retiree. Look at Total Income on line 22 of last year’s tax return if you’re a retiree. Subtract Total Tax (line 16) AND any State or Local Taxes from their respective returns to determine After-Tax Income.

Discretionary Income

Subtract your expenses from your after-tax income to determine how much you have available to fund your goals. This will let you know if you are living above or below your means. It’ll also let you know how much you have to put towards your goals.
This analysis lets pre-retirees know how much they can save, and what they may need for an income in retirement. It lets retirees know how much they’re spending in retirement and can prevent them from running out of money.
When you know how much you’re spending, you know if your nest egg can support it.
Whether you are a pre or post retiree, once you are aware of where your money is going, you can make conscious decisions with your money.


The best way to fund your goals is to save for them. That’s hard to do if you don’t know how much you can save. The best way to know how much you can save is to organize your finances with a cash flow analysis.
This article was originally posted on Apr 18th, 2012, and updated on January 27th, 2021. 

Rich Feight, CFP
Rich Feight, CFP

Hi, I'm Rich Feight I'm a fee-only Certified Financial Planner, successful business owner, and self-made millionaire that knows how to beat the system and become wealthy. I have a lot of clients that have done it too. I'm also pretty good at finding that ever-elusive work/life balance so many of us strive for. Lucky for you I have an abundant mindset and give all my knowledge away on my blog. So if you want to know what it takes to become a millionaire, follow me.

    6 replies to "Organize Your Finances – Cash Flow"

    • Great post Rich. Another best practice for folks to keep in mind is that the amount you save each month should be consider as part of your non-discretionary budget items like your housing, clothing, and food costs. I’ve seen folks who have a reduction in pay (maybe their company is going through a rough patch and they have to cut hours) immediately stop their savings plan without even thinking of cutting their discretionary expenses first.

      • I completely agree Ken! Savings goes down and cable, eating out, and others remain. Good points. Thanks for sharing.

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