In this section, we'll explain what cash flows and balances are, how they differ and how to use these concepts for your own financial analysis.

<aside> 😊 Thinking in terms of cash flow means speaking the language of money. So if there is anything unclear don’t hesitate to ask clarifying questions to our Finance team through the live chat.

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<aside> 💡 Understanding the concepts of cash flows and balance is key to understand:

• How much you save per month
• Your monthly net worth increase
• How to plan ahead

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1. The theory

1.1 Cash Flows

Cash flows represent the money that comes in and out of our accounts:

• Inflows mean money in. It includes everything that increases your cash balance:

  • Income
  • Bonus or irregular income
  • Refunds
  • Dividends (paid in cash)
  • People sending you money

  It excludes internal transfers (money you sent across your accounts)

• Outflows mean money out. It includes everything that decreases your total cash balance:

  • Recurring expenses
  • Variable expenses
  • Investments or acquiring assets
  • Sending money to people

  It excludes internal transfers (money you sent across your accounts)

Cash flows are usually analysed on a monthly basis, but you can analyse them over different horizons such as weekly, quarterly, yearly…

You’re cash flow positive when your Inflows > Outflows for the month (or any given period). You’re cash flow negative when your Outflows > Inflows for the month (or any given period).

To calculate your net monthly cash flows, it’s imperative to include the transactions across all your accounts. You can create Offline Accounts for institutions not supported by Nova.