Ever heard the famous quote "Cash is King"? It may be true to some, but I tend to think there is one true king of personal finances: personal cash flow.

It's understanding how your entire streamline works, from your income to the results you desire. It can look pretty dull on a spreadsheet. Luckily, I've got just the right visual to spice up this topic for you.

Let's max out your financial knowledge!

Building cash flow is a bit like growing a garden. You need water, sunlight, soil, and (more importantly) time. Each one serves a distinctive function to create one result together. With personal cash flow, you are just building your garden. These are your main ingredients:

• Income: How you plan to fund this garden
• Expenses: How to plan to spend on this garden
• Savings: How you plan to grow this garden

But seeing the entire process is one thing. To put this down on paper and sticking to it is another. So, where can you begin if you don't know how to start? While everyone's situation is different, one fun tactic can make this a lot easier:

What is the 50/30/20 Rule?

It's a simple way to map out your income stream. How much to spend? What areas to spend on? How much does it cost to grow it? It's organizing your net income (income after taxes) and allocating it into three categories:

​→ Essential Expenses ​

These are the expenses you NEED to pay. Imagine you lost your job and needed to keep enough cash afloat for several months. What are some of the costs that you know you must pay for this period?

Think of expenses like:

• Rent
• Utilities
• Groceries
• Internet

These things must be paid for to get through the next day. In the beginning, these are usually the bulk of your expenses.

​→ Discretionary Expenses​

Anything outside of a need is a WANT. These aren't necessarily "bad" expenses per se, but they are lower in priority than essential expenses.

For example:

• Shopping
• Dining out
• Subscriptions

These are more like the extras of your expenses—many of which you probably place a high value on! But when it comes to evaluating expenses by urgency, these are the ones people usually target when they want adjustments to their spending in the near term. Once you identify it, it can be a great way to evaluate your spending based on your values.

​→ Financial Goals​

What you don't spend is what you work to improve your finances with. These include:

• Building savings
• Paying down debt
• Investing in growing assets

These are how you continue to protect and build wealth over time. By including all three in an organized fashion, you're setting yourself to have an organized start.

​Increase Income, Increase Savings

Adjustments should be made as cash flow increases, especially when branching away from the 50/30/20 model. Why? Money that isn't saved translates into more expenses. As a result, you inadvertently increase your standard of living

-> Hello, lifestyle inflation

One interesting method to control the increase is to save more of their new income to avoid this mishap. For example, let's say you initially stuck to a solid 20% rate like the 50/30/20 rule. You want to save even more of that new income when you get a raise (for example, a $30,000 net raise). That means not just 20% ($6,000 net) but perhaps 30%-50% ($9,000-$15,000 net) instead.

Not only can you control the increase in the standard of living, but you can also increase your overall savings rate at a more leisurely pace rather than forcing yourself to cut back on your expenses!

That doesn't mean you shouldn't enjoy your money. However, creating a commitment is required if you're looking to get the desired results without disrupting your current lifestyle. You get the best of both worlds with this approach. Build with what you have and compound on your beautiful financial garden too!

- Max

_{Disclaimer: Pashman Financial LLC, its owners, officers, directors, employees, subsidiaries, service providers, content providers and third-party affiliates referred to as “Pashman Financial” do not offer the sale of securities or other investments. None of the information provided is intended as investment, tax, accounting or legal advice, as an offer or solicitation of an offer to buy or sell, or as an endorsement, of any company, security, fund, or other securities or non-securities offering. The information should not be relied upon for purposes of transacting securities or other investments. Your use of the information is at your sole risk. The content is provided ‘as is’ and without warranties, either expressed or implied. Pashman Financial does not promise or guarantee any income or particular result from your use of the information contained herein. Under no circumstances will Pashman Financial LLC be liable for any loss or damage caused by your reliance on the information contained herein. It is your responsibility to evaluate any information, opinion, or other content contained. Please seek the advice of professionals regarding the evaluation of any specific content. Information on this email and website should not be considered a solicitation to buy, an offer to sell, or a recommendation of any security in any jurisdiction where such offer, solicitation, or recommendation would be unlawful or unauthorized. The information on this site is provided “AS IS” and without warranties of any kind either express or implied. To the fullest extent permissible pursuant to applicable laws, Pashman Financial LLC (referred to as “Pashman Financial”) disclaims all warranties, express or implied, including, but not limited to, implied warranties of merchantability, non-infringement, and suitability for a particular purpose. Pashman Financial does not warrant that the information will be free from error. None of the information provided on this email and website is intended as investment, tax, accounting or legal advice, as an offer or solicitation of an offer to buy or sell, or as an endorsement of any company, security, fund, or other securities or non-securities offering. The information should not be relied upon for purposes of transacting securities or other investments. Your use of the information is at your sole risk. Under no circumstances shall Pashman Financial be liable for any direct, indirect, special or consequential damages that result from the use of, or the inability to use, the materials in this site, even if Pashman Financial or a Pashman Financial authorized representative has been advised of the possibility of such damages. In no event shall Pashman Financial LLC have any liability to you for damages, losses, and causes of action for accessing this site. Information on this email and website should not be considered a solicitation to buy, an offer to sell, or a recommendation of any security in any jurisdiction where such offer, solicitation, or recommendation would be unlawful or unauthorized.}

‍