A personal finance blog dedicated discussing such topics as budgeting, asset allocation, 401K, IRA, cash flow, insurance, financial planning, portfolio management, and other areas in personal finance.


Friday, April 08, 2005

Cash Flow Statement - Part II

With my last post in this series, I introduced the cash flow statement. Today we will look at a model cash flow statement so that we can see how it is arranged and what information we can glean from it.

Before we get started, I want to mention a couple of things about cash flow statements in general. Cash flow statements are used to track the sources and uses of income. And, although it doesn't seem to make sense, investing in a 401(k) or other investment account is considered a "use" of funds. Your cash flow statement should be prepared once a year at least and then updated monthly to reflect changes in your situation.

Below is a model cash flow statement that I put together. I meant for it to coincide with the net worth statement.
          Sources of Cash             
Wages/Salary 105,000
Interest 2,000
Mutual Fund Distributions 0
Other 0
Total Financial Assets $107,000

Payroll Deductions
Federal Income Tax 23,000
Social Security & Medicare Tax 7,103
State Income Tax 0
Medical Insurance Premiums 2,000
401(k) Plan 12,000
Total Payroll Deductions $44,103

Fixed Expenses
Mortgage 11,600
Loan Payments 2,000
Utilities 6,000
Insurance 3,000
Property Taxes 3,500
Investment Plans 4,000
Total Fixed Expenses $30,100

Variable Expenses
Charitable Contributions 10,500
Clothing 2,500
Education 4,000
Food 6,000
Gasoline 3,200
Gifts 2,000
Travel/Vacation 2,500
Total Variable Expenses $30,700
Total Expenses $104,903
Positive/(negative) Yearly Cash Flow $2,098

With my next post, I'll give you some useful calculations using the information from the net worth and cash flow statements that will give you an idea of how you are doing.In the meantime, feel free to check out my other posts from the Financial Planning Basics Series:

Financial Planning Basics - The Net Worth Statement

Net Worth Statement - Part II

Net Worth Statement - Part III

Net Worth Statement - Part IV

Net Worth Statement - Part V

Financial Planning Basics - The Cash Flow Statement