The more widespread and positive your Net Cash Flow is, the greater the leeway to deal with unexpected expenses will be.
One of the most basic terms of personal finance is the one known as the Net Cash Flow, so much so that your personal or family financial situation can be easily diagnosed by a quick glance at it.
The Net Cash Flow describes the revenues and expenditures of cash during a determined period of time (for example, a month or a year). If you spend less than you earn, your cash flow will be positive and will increase your net worth; on the other hand, if your expenses are greater than your income, your cash flow will be negative and you will be wasting your net worth, which is not sustainable over time and requires that you take a prompt decision.
The more positive and larger your cash flow is, the greater the leeway you will have to deal with unforeseen contingencies, as well as it contributing to obtaining the financial independence you want. Your peace of mind, freedom and quality of life will improve substantially.
To increase your cash flow, you don’t necessarily have to earn more money; you can increase it by reducing the amount of your recurring expenses (for example, the monthly utility bills), or decreasing unnecessary expenses (for example, buying the latest mobile phone or buying a bigger TV). Another way (maybe the fastest) is to reduce your debts (like Credit Cards or the loan for the purchase of your car).
In any case, always remember that what you are looking for with your financial decisions is to improve your quality of life and to progressively get closer to your goals. Maintaining your Net Cash Flow under control will help you achieve it.