Cash flow is the net amount of money moving in and out of your finances each month. Positive cash flow means income exceeds expenses, giving you money to save, invest, or pay down debt. Negative cash flow means you are spending more than you earn, which leads to increasing debt over time.

The savings rate, calculated as Savings Rate = Net Cash Flow / Total Income x 100, is a powerful metric for financial health. Financial experts commonly recommend saving at least 20% of income. A higher savings rate accelerates wealth building and provides a larger buffer for unexpected expenses.

For example, with a monthly income of $5,700 and expenses of $3,550, your net cash flow is $2,150 and your savings rate is 37.7%. That means $25,800 per year is available for savings and investments. Tracking cash flow regularly helps identify spending patterns, find areas to cut back, and ensure you stay on track toward your financial goals.