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
 
              Expenses                
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