Your Cash flows

I hope your net worth which we defined in last blog was positive.

In this posting, we would analyze your cash flow. Cash flows looks at your sources of income and expenses. This would let you know about your ability to save money for your investments and describe your standard of living. You would also be able to check if you are living within your means and if not, it would highlight your problem areas so that you can take appropriate action based on this information. All these affect your ability to do financial planning.

I suggest you collect the values for the list for a extended time period like three to six month and then average it out to find the actual value for a months time period. This would help in taking care of the variations. Extrapolate the value to get the yearly amount.

The categories in income section are

1. Salary
2. Bonus
3. Secondary income, if any
4. Dividends
5. Capital gains
6. Interests on your deposits
7. Other incomes like rents
8. Miscellaneous incomes

The categories in expense section are

1. Home rent
2. Utility payments
3. Maintenance
• Home
• Vehicle
4. Taxes
• Income
• Property
• Employment
5. Loan payment
• Home loan
• Car loan
• Credit card loan
• Personal
• Study loan
6. Commuting expense
7. Insurance premiums
• Life
• Health
• Vehicle
• Home
• Other
8. Food and clothing
9. Child care
10. Medical expense
11. Education
12. Investments
13. Gifts / Charity contributions
14. Personal items
15. Entertainment
16. Other miscellaneous

Add up the Incomes and expense account amounts. Subtract the total expense amount from the total income amount to find your net cash inflow or outflow.

Word of caution: Don’t guess too low a value and be complete in your list to get as near to the exact value.

Hey! i am keeping my fingers crossed for you.