If Net Monthly Cash Flow is a negative number, then your monthly expenditures and savings exceed your gross monthly income. A Negative Cash Flow may lead to increased debt and a loss of wealth building potential over your lifetime. In order to balance your budget, you should seek to decrease debt balances and/or reassess expense allocations. Ask your financial representative if a Cash Flow Management Study is appropriate to use in your financial situation.
If Net Monthly Cash Flow is a positive number, then your monthly expenditures and savings are less than your gross monthly income. This means that you may be able to use more monthly income to reduce debt and/or increase savings or lifestyle. This type of positive cash flow, if continued, provides a potential opportunity for wealth building and the realization of meeting financial needs, goals and desires.
For many people, a savings rate of atleast 15% of gross annual income is considered to be appropriate for long-term financial well-being. To provide for increases in quality of life, retirement, college education, and other needs and desires, a dedicated savings plan is necessary. An annual savings rate of atleast 15% helps to account for future wealth eroding factors such as taxes, technological change, plan obsolescence, inflation, and unknown variables. Without proper consideration of such factors, individuals may not reach their financial needs, goals or desires. Your financial representative will help you develop an appropriate and effective savings strategy.