Money comes in and goes out every month. Where it comes from and where it goes we refer to as your cash flow. This information is important to document in order to make you aware of all of your sources of income, your spending habits and to show where money may be saved. Use the following worksheet to illustrate your cash flow:
| Where it Comes From |  |
Where It goes | |||
| $Annual Amount | $Annual Amount | ||||
| Family Support | Family Support | ||||
| Salary | Income Tax | ||||
| Bonus and Commissions | Mortgage or Rent | ||||
| Freelance Consulting | Property Taxes | ||||
| Dividends | Utilities | ||||
| Interest | Auto Maintenance | ||||
| Rent | Commuting/other Transp. | ||||
| Social Security | Insurance | ||||
| Pensions | Automobile | ||||
| Annuities | Homeowner’s or Renter’s | ||||
| Tax Refunds | Life | ||||
| Other | Health | ||||
|
Total Inflow |
Disability | ||||
| Child Care | |||||
| Education | |||||
| Food | |||||
| Entertainment | |||||
| Vacation/Travel | |||||
| Club Dues | |||||
| Medical Expenses | |||||
| Clothing | |||||
| Household Misc. | |||||
| Home Improvements | |||||
| Magazines, Books | |||||
| Contributions to Charities | |||||
|
Total Outflow |
|||||
| Total Inflow | |||||
| Minus Outflow | |||||
| Surplus or Deficit | |||||
Once your net worth and cash flow sheets have been filled out you should have a pretty good idea of your financial inventory. Use this information to find where you can curb our spending habits enough in order to save 10%-15% of your total income.
This is now your budget. Stick to it!
The money you put away will be invested in order to reach your short and long-term financial goals. Where to put this money depends on factors such as time horizon, risk tolerance etc. and will be discussed in subsequent articles.
Remember, if you don’t put money away today, there won’t be any saved for tomorrow.
