Topic 5: Cash Flow Management

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Presentation transcript:

Topic 5: Cash Flow Management Net Worth Statement (Balance Sheet) Assets Liquid Investments Retirement Education Real Estate Personal/Use Liabilities Short-term versus long-term Personal versus business Deductible versus non-deductible Secured: has collateral such as home, car Lower rates

Topic 5: Cash Flow Management Income and expense statement Income Salary versus self-employed Reinvested income: dividends Data from income tax return Expenses Income and payroll taxes Fixed (Dedicated) Mortgage payment Car payment Student loan payment Savings/investments: retirement, education, other Discretionary Food/entertainment/transportation “Net Income” Not what you make, it is what you keep Savings strategies Automatic First, not what’s left over Save raises

Topic 5: Cash Flow Management Income and expense statement Debt Management Ratios Consumer debt < 20% take-home pay Car loans, credit cards, etc. Mortgage payments < 28% gross income Monthly payments all debt < 36% gross income

Topic 5: Cash Flow Management Budgeting Motivate Measure progress Should be simple, flexible Should be compared with actual results Emergency Fund 3 – 6 months of expenses Sources of liquidity Lines of credit