Two types of financial statements are important to financial planning: cash flow statments and net worth statements.
Cash flow statements: This financial information compares your monthly net income (after deductions) to your regular monthly expenses. To create a cash flow statement, list your monthly expenses. Subtract the total amount of your expenses from the total amount of your income to define your cash flow.
Use this information as you create a budget to make plans for future spending. Compare the monthly expenses from your cash flow statement to the items you have listed in your budget-spending plan.
Net worth statement: This list of personal financial information reflects your current "net worth" by looking at the total value of your assets (cash, property and other valuables with income potential) as compared to your total liabilities (money you owe). Use the information about your personal net worth as an important factor in the development of your assets and all of your liabilities.
Cash flow statements: This financial information compares your monthly net income (after deductions) to your regular monthly expenses. To create a cash flow statement, list your monthly expenses. Subtract the total amount of your expenses from the total amount of your income to define your cash flow.
Use this information as you create a budget to make plans for future spending. Compare the monthly expenses from your cash flow statement to the items you have listed in your budget-spending plan.
- Examples of income include:
- Wages
- Other earnings and sources of income
- Child support and alimony
- Examples of regular monthly expenses include:
- Mortgage or rent
- Food and groceries
- Property taxes
- Insurance costs
- Savings and investment contributions
- Home maintenance costs
- Heating and air conditioning expenses
- Utilities, such as electricity, water, sewer, trash pick up
- Medical expenses, such as medical bills, prescriptions, hospital parking
- Child care and child support expenses
- Vehicle expenses
- Loans
- Credit cards
- Clothing
- Memberships
- Personal care
- Entertainment, recreation and hobby expenses
Net worth statement: This list of personal financial information reflects your current "net worth" by looking at the total value of your assets (cash, property and other valuables with income potential) as compared to your total liabilities (money you owe). Use the information about your personal net worth as an important factor in the development of your assets and all of your liabilities.
- Examples of assets include:
- Cash, including the amounts that are in checking and savings accounts
- Money market funds
- Certificates of deposits
- Cash value of life insurance
- Market value of real estate
- Retirement accounts
- Collectibles
- Market value of vehicles and boats
- Personal valuables, such as jewelry and home furnishings
- Business assets or property
- Examples of liabilities include:
- Mortgage balance
- Unpaid medical and dental bills
- Loan balances
- Home-equity credit line
- Credit card balances
- Taxes owed
- Other bills
