Personal Financial Statements Ch PoB 2011

 Money Management – refers to the day-to-day financial activities associated with using limited income to satisfy your unlimited needs and wants  Involves getting the most for your money through:  Careful planning  Savings  Spending  Know your current financial status  Set goals Money Management Basics

 Balance Sheet – is a records of assets and liabilities at a point in time  Reports what a family owns as well as owes Personal Balance Sheet

 Personal Assets – items of value  Examples: money in bank accounts, investments, furniture, clothing, automobiles, jewelry, and rare coins  Assets are the first thing listed on the balance sheet  Liabilities – amounts owed to others  Examples: credit card balances, car loans, home mortgage, or personal loans  Liabilities are the second item on the balance sheet Assets & Liabilities

 Net Worth - the difference between a person’s assets and liabilities  Assets – Liabilities = Net Worth  Net Worth = Owner’s Equity Net Worth

 Cash Flow Statement- reports net wages and other income along with spending for a period Cash Flow Statement

Personal Cash Flow Statements

 Cash Inflow – is the money you have available to spend as a result of working or from other income  first part of cash flow statement  Net pay (take-home pay) – amount of a paycheck after taxes and other payroll deductions  Examples of Deductions: retirement contributions, charges for health benefits, and local, state & federal taxes  Reported first on the statement Cash Inflows

 Cash Outflows – expenditures  Reported second on the cash flow statement  Examples: food, clothing, transportation, and other living costs Cash Outflows

 Subtract cash outflows (total spending) from the cash inflows (total income)  Final step in preparing the cash flow statement  Difference between the two provides net worth Compare Inflows to Outflows

1.What are some characteristics of a wise money manager? 2.What are the three (3) main categories on a personal balance sheet? 3.What do cash outflows represent? 4.What do cash inflows represent? Review