Finally, create a line item that calculates monthly net income. To do this, subtract total expenses from total income for each month. If the resulting number is negative, that means you have spent more than you earned and it should be highlighted in red. Negative cash flow is the cardinal sin of managing your money. If you consistently find yourself in a negative cash flow situation, you need to take a hard look at where your money is going and how you can adjust your expenses to live within your means.
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Once you create a personal income statement, maintaining it is just a matter of entering your income and expenses each month. The easiest way to do this is when you pay your bills and when you balance your checkbook. When you get in the habit of maintaining your personal income statement, it should only take a few extra minutes of your time. But knowing where you stand can help you get where you want to be.
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