Section 3.2 Personal Financial Statements

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Presentation transcript:

Section 3.2 Personal Financial Statements Personal Finance Section 3.2 Personal Financial Statements

Objectives Create a Personal Balance Sheet Create a Cash Flow Statement

What are you worth? Personal Financial Statement: Documents that provide information about your current financial position Balance Sheet: Lists the items of value you own, your debts and net worth Net worth: Difference between what you own and owe

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

STEP 1 Determine Your assets: Liquid (Cash & items that can be converted to cash fast) Real Estate: Market Value Personal Possessions: Example, Jewelry Investments

STEP 2 Determine Your liabilities: Current Liabilities: Short term debt paid within one year Examples: Med bills, cash loans, taxes Long term: Not paid within one year Examples: Mortgage, car payments

STEPS 3 and 4 3. Calculate Your Net Worth Insolvency: Liabilities are greater than your assets 4. Evaluate: What changes can I make?

How to Increase Your Net Worth Reduce Expenses How to Increase Your Net Worth Reduce Spending and Debts Increase Your Savings Increase Your Investments

Discretionary Income The money left over after a person has paid for the essentials – food, clothing, shelter, transportation, and medication

Create Cash Flow Cash Flow: Money that goes into and out of your wallet Step 1: Record your income: Take home pay- Money after taxes Step 2: Record Expenses: Variable and Fixed Step 3: Determine Cash Flow

Surplus Extra money that can be spent or saved, depending on a person’s financial goals and values

Deficit The situation that occurs if a person spends more than he or she earns or receives

Various Financial Ratios

Cash Flow Statement

Class Work for Today Hand in For A Grade Create a Personal Balance Sheet (Use p.69 and notes as a guide) Create a Cash Flow Statement (Use p. 71 and notes as a guide) Hand in For A Grade

3.2 Assessment Questions Page 74 #1-6 Page 78 #1-3