Prepare your Cashflow Statement

by ryan on December 17, 2016


Prepare your Cashflow Statements


In the previous step you computed your net worth. The job at hand now is to improve upon that number. The only way to do that is to ensure that you have a positive cashflow position so that you can take that excess cash over your expenditure and allocate it to improve your net worth.

To do this you must prepare your cashflow statement using the personal budgeting spreadsheet. Ideally you should monitor you cashflow carefully and often, perhaps on a quarterly basis. But in practice, if you comfortable that you are gaining ground upon your high net worth target, then you may only want to compute your cashflow once a year to check if you’ve been overspending.

Remember not to miss out children’s extra curricular activites like private tuition, piano or violin lessons, etc. As a guide you should be saving at least 10%, and preferably 20% of your monthly household income.

Your future wealth will depend upon those savings and the eventual investment of those funds. So if you find that you are unable to save as much as we suggest, please consider adjusting your expenses accordingly. Ask yourself if costly piano lessons, say, forced down your child’s throat today and never even enjoyed, are worth sacrificing the full funding of her university education in Cambridge tomorrow.

Alternatively, if you find that you are drowning in debt, then the first order of business is to retire that as quickly as possible. As more and more debt is retired, you will find that you are freeing up hardearned income to generate interest and dividends for you, instead of frittering it away through interest payments to other people, banks and credit card companies. There are few feelings in life so rewarding as battling a debt mountain and levelling it to the ground.





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