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Published byAndrea Dean Modified over 9 years ago
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Personal Financial Statements Ch. 16-1 PoB 2011
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Money Management – refers to the day-to-day financial activities associated with using limited income to satisfy your unlimited needs and wants Involves getting the most for your money through: Careful planning Savings Spending Know your current financial status Set goals Money Management Basics
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Balance Sheet – is a records of assets and liabilities at a point in time Reports what a family owns as well as owes Personal Balance Sheet
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Personal Assets – items of value Examples: money in bank accounts, investments, furniture, clothing, automobiles, jewelry, and rare coins Assets are the first thing listed on the balance sheet Liabilities – amounts owed to others Examples: credit card balances, car loans, home mortgage, or personal loans Liabilities are the second item on the balance sheet Assets & Liabilities
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Net Worth - the difference between a person’s assets and liabilities Assets – Liabilities = Net Worth Net Worth = Owner’s Equity Net Worth
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Cash Flow Statement- reports net wages and other income along with spending for a period Cash Flow Statement
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Personal Cash Flow Statements
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Cash Inflow – is the money you have available to spend as a result of working or from other income first part of cash flow statement Net pay (take-home pay) – amount of a paycheck after taxes and other payroll deductions Examples of Deductions: retirement contributions, charges for health benefits, and local, state & federal taxes Reported first on the statement Cash Inflows
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Cash Outflows – expenditures Reported second on the cash flow statement Examples: food, clothing, transportation, and other living costs Cash Outflows
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Subtract cash outflows (total spending) from the cash inflows (total income) Final step in preparing the cash flow statement Difference between the two provides net worth Compare Inflows to Outflows
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1.What are some characteristics of a wise money manager? 2.What are the three (3) main categories on a personal balance sheet? 3.What do cash outflows represent? 4.What do cash inflows represent? Review
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