Cash-flow Management

Cash flow management is an indicator of financial management skills and behaviors and can influence an individual’s long-term financial security and asset accumulation. A cash flow statement (also referred to as a budget) can indicate if clients are on the right path or making progress to developing positive financial management skills and behaviors. An individual’s cash flow statement tracks the flow of cash in and out of a household and measures their monthly and annual net cash flow. Individuals with positive cash flow management behaviors spend less than they earn and are more likely to be in a better financial situation and on the path to becoming financially healthy.

Cash flow management behaviors can be tracked according to the program and participant-set goals. Participant cash flow statements can be assessed monthly and annually to measure progress toward achieving financial planning goals and improvement in cash flow management behaviors.

To gauge success programs can use cash flow statements to compute a client’s debt-to-income ratio (the percentage of income used to pay debts/expenses) to see if clients are overburdened by debt. Most banks and financial professionals agree that debt-to-income ratio should be less than 36 percent of income. Clients that continually run a deficit or have a debt to income ratio higher than 36 percent may need additional counseling or assistance to adjust their behaviors.


Sources Cited

Welch, Evan, P. Building a Personal Cash Flow Statement, Posted on May 24, 2010. Financial Planning Association, Accessed on 1/3/2014 at


Additional Resources

NeighborWorks’ Success Measures Tools for Practitioners