1. Money Management Strategy Personal Financial Statement
Objective: SWBAT develop personal balance sheet and cash flow statement.
Do Now: How can personal financial statements help you?

2. Personal Financial Statement
Documents issued by banks, federal and state governments, and businesses can only reveal part of your financial picture
For a complete look at your financial situation, you should create your own personal financial statements: personal balance sheet and cash flow statement

3. Personal Financial Statement
Document that provides information about an individual’s current financial position and presents a summary of income and spending
Personal Financial Statements can help you:
Determine what you own and what you owe
Measure your progress toward your financial goals
Track your financial activities
Organize information that you can use when you file your tax return or apply for credit

4. I. Personal Balance Sheet
Personal balance sheet, also called a net worth statement, is a financial statement that lists items of value owned, debts owed, and a person’s net worth
Follow the following steps to create a personal balance sheet:

5. I. Personal Balance Sheet
Step 1. Determine your assets.
Assets are any items of value that you own, including cash, property, personal possessions, and investments.
There are four categories of wealth (an abundance of valuable material possessions or resources)
Liquid Assets
Real Estate (based on market value – the price it will sell)
Personal Possessions
Investment Assets

6. I. Personal Balance Sheet
Step 2. Determine your liabilities. Liabilities are the debts that you owe.
There are two categories of liabilities
Current Liabilities
short-term debts that have to be paid within one year
Long-Term Liabilities
debts that do not have to be fully repaid for at least a year

7. I. Personal Balance Sheet
Step 3. Calculate your net worth.
Net Worth: the difference between
the amount that you own and the debts that you owe
Insolvency: a financial state where liabilities are greater than assets
Net Worth = Asset - Liabilities

8. I. Personal Balance Sheet
Step 4. Evaluate Your Financial Situation.
* Update your balance sheet every few months!
Do you own more than you owe?
Good! Keep it up!
Do you owe more than you own? Is your net worth decreasing or just holding steady?
Make changes by increasing your savings, investments, reducing your expenses and/or debt!

9. I. Personal Balance Sheet

10. II. Cash Flow Statement Income versus Expenses
Cash Flow: money that goes into and out of your wallet and bank account
Cash Inflow: money you receive (income, interest, allowances)
Cash Outflow: money you spend (expenses)
Follow the following steps to create a cash flow statement:

11. II. Cash Flow Statement Step 1. Record Your Income (Cash Inflow).
Gross pay/Gross income: the total amount of money an employee earns in a pay period before deductions
Take-home pay/Net pay: the amount of income left after taxes and other deductions are taken out of your gross pay
Discretionary income: money left over after paying for essentials

12. II. Cash Flow Statement Step 2. Record Your Expenses (Cash Outflow).
Fixed Expenses: expenses that are more or less the same each month.
Variable Expenses: expenses that may change from month to month.

13. Let’s play the Budget Odyssey game!!!
II. Cash Flow Statement
Step 3. Determine Your Net Cash Flow.
Net Cash Flow = Income – Expenses
Surplus: cash flow is positive; extra money
that can be spent or saved, depending on a
person’s financial goals and values
Deficit: cash flow is negative; more money is spent than is earned or received
Let’s play the Budget Odyssey game!!!

14. II. Cash Flow Statement

15. Analyzing Your Financial Position
When your cash flow changes, so does your net worth. If you have a deficit cash flow, your net worth declines.
To make up for the deficit, you will either:
borrow money, increasing your liabilities or
draw from your savings, decreasing your assets

16. Analyzing Your Financial Position
If you have a surplus cash flow, your net worth can go up.
You can choose to:
save the money, increasing your assets or
pay off your previous debts, reducing your liabilities