Cash Flow Statement | Money Club

Annual Cash Flow Statement

After completing a summary of your Net Worth, the next task is to complete a summary of your Cash Flow. It is important to get a good handle on your current financial situation. How much money is coming in each month? What are you spending your money on?

We have provided an example you can use as a guide. Edit as needed to fit your situation.

To download our Excel workbook click here

It is easiest to start with a monthly estimate and then to extrapolate it to an annual number. Begin with your income sources. Next, input all of your expenses.

Income - Expenses = Savings

Your objective is to answer the following question: What is a realistic savings target for the year?

Savings needs to be separated into different buckets:

Emergency fund
Permanent savings (home purchase, retirement etc)
Discretionary savings (travel, wedding, vehicle etc)

Don't obsess about finding and inputting exact information, especially when working on your first draft. Speed is important so estimates are ok. The important thing is to ensure you are including all the important inputs. Your bank and credit card statements are both good sources of information to understand your spending habits.

What to do with your savings?

Pay off any credit card debt.
Emergency fund: Get one established. Accidents happen...
- Funds should be put in a high interest savings account.
- How much? Enough to cover a minimum of 3 months of living expenses.
Pay down high interest debt.
Invest for the long term in broad based ETF/index funds.

Permanent vs Discretionary Savings

Permanent savings are funds you never intend to spend (except perhaps to buy a place to live many years from now). These are the funds you intend to invest in financial assets - for long term growth.

Discretionary savings are funds you intend to spend in the next year or two. Perhaps for travel. Or a wedding. Or some other activity. Discretionary savings are going to be consumed (the money will be spent). Open a second or third bank account to save for these activities.

Pay Yourself First

Do you hate budgeting? An easy way to save is to simply decide how much go your take-home pay you want to save.