If boosting your wealth in 2026 is one of your New Year’s resolutions, this formula could be a great way to get started.
Smart finance always comes down to the numbers, but the letters can also make an impact. Take, for example, the “cash flow” formula. While this simple calculation is more commonly applied to the business world, there’s no reason why you can’t apply it to your personal finances as well.
But there’s a catch; this formula isn’t the actual treasure, but it could be the key that unlocks riches for you in 2026. Here’s how it goes: income minus expenses and debt = cash flow.
Read on as we break down each element, demonstrate how they work together and highlight the variables that can bring the formula into focus, or potentially throw it off.
“Cash flow is the lifeblood of a business,” Melissa Houston, a CPA who covers women in business, wrote in a Forbes article (1). “It’s the stream of money coming in and going out that keeps operations running, pays bills and helps a company to grow.”
There are quite a few parallels that allow this statement to apply to both business and personal finance. Your pay checks represent the stream of money coming in; bills, debts and other expenses make up the money going out; and managing both properly can keep your lifestyle running smoothly.
One way to create wealth is to treat your personal finances like a successful CEO would manage a company. For better understanding, let’s break down the main components of the cash flow formula.
Your income is the money that you bring in through work, investments, side hustles, pensions and anything else that goes into your checking account. Your ability to boost your income is an important part of financial growth, but it’s not the only thing you should focus on.
Expenses eat away at your income. Some of them — like rent, groceries and transportation — are unavoidable, but excessive spending on things like vacations or dining out are not. When it comes to spending, take a lesson from the “quiet millionaires,” who often protect their net worth by avoiding big-ticket purchases and expenses.
As it pertains to cash flow, debt can become a problem if you are spending too much of your income on things like car loan payments or paying down your credit card balance. There is, however, such a thing as good and bad debt.
For example, a mortgage can be considered good debt since the money is going into an appreciating asset that gives you a place to live. But high-interest credit card debt is far from good, especially if you’re carrying a balance and allowing interest to increase your debt obligation.
Cash flow is the money left over after your income has covered all of your expenses, including debt payments. If your cash flow is high, you’ll have more money to save and invest. While you can invest this money in stocks, bonds and exchange-traded funds (ETFs), you could also make capital improvements to your property (if you own real estate), such as a home renovation that drives up its value.
Read More: Here are the 5 market moves you can’t ignore heading into 2026 — and what savvy investors are doing now to prepare
Here are three cash-flow strategies businesses use that you can easily apply to your own finances in the new year.
This does not mean you should ignore expenses, especially the wasteful ones. Impulse purchases, dining out or that streaming service that you hardly use are all examples of wasteful spending, but there is a limit to how much you can cut. However, there could be fewer limits on your ability to earn income.
If you have time in your schedule for freelance work or a side hustle, that boost to your income can go a long way in your quest for greater riches in 2026.
When it comes to bad debt, credit cards remain the chief culprit. In Q1 2025, the national average debt among cardholders carrying unpaid balances was $7,321, according to Forbes (2). Meanwhile, the average credit card interest rate in August was 23.99%, according to Investopedia (3).
Simply put, credit card debt is the king of bad debts. Another option for borrowing could be a low interest personal loan, which can free up cash through a monthly payment plan that ensures you are paying down your debt.
While this can be risky for a novice investor, increased cash flow leaves room to take on good debt by purchasing real estate. For example, if you purchase a rental property, you can use the rent you collect to pay the mortgage while owning an appreciating asset. However, chatting with a financial adviser or real estate professional before attempting this is best.
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Forbes (1, 2); Investopedia (3)
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
