Then calculate your average monthly expenses . These include your rent or mortgage, car lease or loan, personal loan, credit card and child support or alimony payments. Also include money for groceries, utilities, transportation and insurance. Don't forget money that you spend on items that are "discretionary," rather than necessary—for example, cable television subscriptions, gym fees, clothing, gifts, and the like. Average your actual expenses over a three month period to come up with a reliable monthly estimate for your total expenses. Subtract your monthly expense figure from your monthly net income to determine your leftover cash supply. If the result is a negative cash flow , that is, if you spend more than you earn, you'll need to look for ways to cut back on your expenses. Similarly, if the result is a positive cash flow , but your spending nearly equals your earnings, it might be too soon to start investing right now.
To invest, your net income must exceed your expenses—with some to spare. If this is not the case, look for expenses you could eliminate or reduce. Maybe some of your discretionary expenses are luxuries that you could give up. Perhaps a debt refinancing or consolidation could reduce your monthly payments. A financial professional may be able to help you with these matters.