Personal Financial Statements

Ch. 16-1 PoB 2011

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

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

Personal Balance Sheet

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

Net Worth - the difference between a person’s assets and liabilities Assets – Liabilities = Net Worth Net Worth = Owner’s Equity

Net Worth

Cash Flow Statement- reports net wages and other income along with spending for a period

Cash Flow Statement

Personal Cash Flow Statements

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

Cash Outflows – expenditures Reported second on the cash flow statement Examples: food, clothing, transportation, and

other living costs

Cash Outflows

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

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