We’ve often talk about cash flow, but what does it really mean? I find the best way to describe cash flow is through the analogy of a funnel, or actually three funnels. There’s the first funnel, the cash that flows into their lives from a paycheck. Withholding taxes for the government come out of that check in the funnel, as well as unemployment taxes and all the other taxes the government imposes, so already you see a lot less money from salary once it’s gone through this funnel.

All that’s left over from the first funnel flows into a second funnel, the “Things We Have to Pay” funnel or the debt funnel. That includes your mortgage, personal loans (i.e., student loans), car loans, credit cards, etc. The money that is left over from this second funnel trickles into the third funnel, the “lifestyle” funnel. This funnel goes to pay for your food, utilities, vacations, clothes, etc.

Whatever is left after this last funnel—if there’s anything—is what people see as money they can then save for their future. But that’s where financial advisors come into play. They can analyze the funnels and determine how to increase the amount left over at the end. By allocating funds in different ways, one’s financial wellbeing can be improved. Whether that’s through refinancing debt payouts or re-examining how tax forms are filled out, even looking at the lifestyle funnel and seeing if there are ways to change spending habits that don’t alter happiness now. The end result is to map a route to live the life you want to live now, but find ways to ensure living through retirement and the rest of your life as well.

For more information on maximizing your cash flow and your funnels, visit tswealth.com.