Step 1 of 6
Cash flow and net worth
This chapter starts Level 1, the foundation of your Financial Pyramid. You'll see exactly where your money stands today.
- Goal
- Know what comes in, what goes out, and what you own and owe.
- Milestone
- You've filled in a one-month cash flow statement and a net worth statement.
- Next step
- Find one expense to cut or reduce, and write down how much it frees up each month.
Your place on the pyramid
- 6
- 5
- 4
- 3
- 2
- 1Managing your cash flow
- Starting point
You can't grow your money until you know where you're starting. If you don't know what you earn, spend and save, it's hard to take control.
Knowing your numbers helps you
- See where your money comes from and where it goes
- Make better spending and saving decisions
- Track your progress more easily
Compares
- Cash flow
- Money in vs. money out
- Net worth
- Assets vs. liabilities
Time frame
- Cash flow
- Weekly or monthly
- Net worth
- Long term, a snapshot of today
Helps you
- Cash flow
- Manage daily spending and saving
- Net worth
- Track your long-term financial health
| Cash flow | Net worth | |
|---|---|---|
| Compares | Money in vs. money out | Assets vs. liabilities |
| Time frame | Weekly or monthly | Long term, a snapshot of today |
| Helps you | Manage daily spending and saving | Track your long-term financial health |
Cash flow = money in − money out
Your cash flow is how much money comes in each month compared with how much goes out. Ideally, it's positive. That means you spend less than you earn.
Example
- Monthly salary
- +₱30,000
- Side gig
- +₱5,000
- Rent
- −₱10,000
- Food
- −₱8,000
- Bills
- −₱5,000
- Miscellaneous
- −₱3,000
- Cash flow
- +₱9,000
This person has ₱9,000 left each month to give a job: savings, an emergency fund, paying down debt or investing. If the number were negative, the gap would be covered by savings or new debt, and fixing that comes first.
Net worth = assets − liabilities
Your net worth is the value of everything you own (cash, savings, investments, property and gadgets) minus your debts (loans, credit card balances, money borrowed from family or friends, and unpaid bills). The goal is to grow your assets and slowly reduce your debts over time.