Calculating a Personal Cash Flow Statement

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  • 0:02 Calculating Personal Cash Flow
  • 0:34 Part 1: The Cash Coming In
  • 1:58 Part 2: The Cash Going Out
  • 3:07 The Cash Flow Statement
  • 3:56 Lesson Summary
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Lesson Transcript
Instructor: Dr. Douglas Hawks

Douglas has two master's degrees (MPA & MBA) and is currently working on his PhD in Higher Education Administration.

Cash is king. You can budget based on expectations, but you also need a way to track the actual amounts of cash you bring in and put out. In this lesson, we'll learn how to build a cash flow statement.

Calculating Personal Cash Flow

Investors expect businesses to provide them with certain financial statements, specifically an income statement, a balance sheet, and a statement of cash flows. Each of these financial statements has a specific purpose, and each provides important information for investors.

The same information that investors get from these business financial statements, you can get for yourself, based on your finances. In this lesson, we'll talk about calculating a cash flow statement.

Part 1: The Cash Coming In

The purpose of a cash flow statement is to track the net change in your cash over time. So, one of the first things you need to do is decide what time frame you want to track. Companies, and most people, typically settle on monthly.

There's a reason the frequency of monthly makes sense. Many of the expenses that you may pay with cash are billed monthly. You might get paid twice a month, and that's okay because your cash flow statement will report monthly income, which will simply be your two paychecks from that month added together. At the end of the month, your net number will be the same.

Once you figure out the time frame, you need to start tracking your cash inflow. This is all the cash that you receive. An important note to remember: You need to receive the cash. If you split the dinner check and your friend says, 'I'll pay you my half later,' you don't count that as income because you haven't received the cash yet. If you get $20 from your grandmother for your birthday, you do count it. Your goal isn't to determine how much cash you can expect to receive every month, but to track the exact amount you bring in. Fluctuations are okay.

One month, you might get a bonus or a tax return; another, you may get a pair of shoes from your parents for your birthday, which you dislike, and opt to return for cash. All of those are inflows of cash, and all go in to your statement of cash flows.

Part 2: The Cash Going Out

As much fun as it is to see the money that comes in, the goal of a cash flow statement is to track where and when it goes out, too. So, the second part of the statement is to see where the cash goes out. This part can be tricky, for a number of reasons.

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