This came up in conversation with a friend who’s  very good at budgeting, is totally on top of her savings, etc – cash flow is different than a budget. And it really is pretty important that you track them both. In the sense of not getting overdrawn, cash flow is more important that a budget.

A budget is simply a goal- a desired amount that you want to spend on certain activities for the week/month/year- however you budget. Its very good as an overview and for clarifying your goals.

You can (and should) project your cash flow regardless of whether you have a budget or not. Since you’ve been tracking your spending, you should know when you have money coming in, and when bills need to be paid. You should even have a good idea of what those bills run (for the non-set amount ones).

Now, just put it all down. One month, two months, the whole year, if that’s what you want to do.

I use excel and generally do cash flow for two months at a time. I use conditional formatting so that my spreadsheet automatically alerts me if the balance drops below a certain point. Then I can adjust when I pay bills if necessary, or when I make extra payments on a loan. Whatever I need to do- I can make those changes in advance and not panic when the time comes and there’s not enough money in the account.

My friend is planning for her wedding and has a lot of deposits and payments that need to be made, which is upsetting her normal spending patterns. She had a bad month in May, and feels like things will be really tight for June because of the non-standard expenses. After talking about it, she’s decided to cash flow out the next 6 months until the wedding so that she has a better picture of her finances. And just making the decision has helped her feel more in control.