Beginners Lessons Retirement

How Much Money Do You REALLY Make? (aka WTF is Cash Flow?)

There are too many damn personal finance books out there and 99% of them suck ass. In some crazy anachronistic world, if the Nazis had chosen to burn them instead of the books that they did; they may have gotten their OWN gold star.

**NSFW is aware that the above joke could be construed as anti-Semitic and the author has been swiftly kicked in his (or her…) penis.

Most of those books say the same things repeatedly and take up several chapters or even books worth fluffing up easy concepts to get your $29.95. We won’t spend a lot of time on this site teaching you about personal finance and budgeting concepts that have been covered a billion times UNLESS the concept will help you moving forward in terms of learning about more complicated investment ideas. That being said. Here are about 90% of the personal finance books out there summed up as quickly as possible. Side note: throughout this lesson we’re going to throw some jargon at you. Don’t worry about writing it down to remember it. Just read through the whole lesson and it will take hold in your mind much better.




If CASH FLOW = NEGATIVE then too much money is going out. Stop spending so damn much.

If CASH FLOW = POSITIVE (but there isn’t much left over) = You have 3 options. Go on a budget. Make more money. Or Both.

If CASH FLOW = POSITIVE (and there is a lot left over) =  Either 1. You didn’t calculate it right, because like most people you don’t know how much you really spend and you just guessed. Or 2. You’ve done this before (recently) and can skip to the summary.

Thus ends the lesson from most of those books in the finance section at Barnes and Noble.

Money In is the easier part and we’ll run through that quickly. You get paid and get a check, Paypal, direct deposit, etc. Money Out is an idea that probably needs adjusting for most of you. Especially those that originally come from middle and lower income families. When you first get a check from your job, most of you (unless it’s one of your first checks ever) only look at the “net” amount. Meaning the amount you have left after taxes and after health insurance (if you’re lucky enough to have it). That’s all you care about, because that’s all you have left to spend. STOP IT. As of right now, you need to see what you got paid originally, how much you paid in taxes, and what is left over. You are currently looking at money like the “poor” do and we have to shift your thinking for later use.


The MONEY LEFT OVER after taxes, contributions, and health insurance is your NET INCOME from work.

Picture going fishing and throwing a net into some Gross, murky water. What’s left in the Net when you pull it out of the water is what you get to take home with you to eat or throw at children or whatever. That’s a weird, redneck-ass analogy, but it’ll stick. The Net comes out of the Gross water with what you get to take home. Picture, NOW! Don’t just read it and think we’re stupid.

Now we take your your income and we’re going to destroy it with all the crap you spend money on. Now is the time most of you will start guessing what you spend on each of the things listed below. You are wrong. Go look at your bank statements online and get the real numbers for what you’re spending in a month. It’s time consuming and a pain, but everybody who wants to have any money needs to do it at least once. To get an even better picture, do this for the last 3-6 months and average them together.

  • Rent or Mortgage
  • Electricity
  • Water
  • Gas (utility)
  • Internet
  • Netflix, Prime, Hulu, Cable, etc
  • Car Insurance
  • Car Payment,  Metro Bus/Rail Card with reloads, etc
  • Gasoline
  • Renter’s Insurance
  • Food (take a month’s worth of fast food and grocery store trips and add them all up)
  • Child Support
  • Credit Card payments
  • Student Debt payments
  • Gym Membership
  • Cigarettes
  • Any Other recurring monthly expenses you can think of…

Now look at your GROSS INCOME, look at the TAXES and health INSURANCE you paid out, now from the NET INCOME left over, subtract all of those EXPENSES. This money left over is your CASH FLOW.

This cash flow number is what you really make from all the work you do at the end of the day. All of those hours you put in and expenses you pay are just to have the life you have now. You’re going to start thinking of yourself, and the work you do, and the life you live as a business. And it’s probably really depressing to the majority of you… That’s fine. This is just a starting point and now that you understand this concept, you have a lot more to work with and you’ll have a lot more control of the future.


Gross Income =  Money you get paid before taxes and insurance

Net Income = Money left over after taxes and insurance

Expenses= All the stuff you have to pay for

Cash Flow = What’s left over after paying taxes, insurance, and expenses
(aka how much money you REALLY make)