Collecting Cash Flow Data

On this page, you will:

• learn how to collect cash flow data.
• learn how to build your personal cash flow statement.

It is important for you to collect as much data as possible before you plan your budget. The saying “Garbage In, Garbage Out” applies to budget planning as well.

By collecting data, you will learn more about your current financial health, your spending pattern, your income streams, where your money is and where your debts are.

Altogether there are 4 areas to focus on. They are Income, Expense, Assets and Debts.

You may download the Cash Flows worksheet to compile the income and expense data and the Net Worth worksheet to collect the assets and liabilities data. Alternatively, you may use this online budget calculator from www.providian.com.

Cash In Flow (Income)

Income is money that comes into your possession and you can rely on this income to continue producing money for you in the future. Examples include weekly or monthly paycheck, rental income and fixed deposit interest.

The following notes are to be read in conjunction with the Cash Flow Example.

• Salaries and wages: Use your take-home-pay figure because this is what you actually have at your disposal to plan your budget.
  
  
• Contract: If you have a contract that expires in 5 months, then you multiply your month contract earnings with 5 months and not 12 months. This applies to all your other income streams if you know they will not last.
  
  
• Bonus: If you have a contractual bonus stipulated in your contract, then you may add in this amount. If your bonus is based on your performance, or the company’s performance then you should leave this empty.
  
  
• Rental Income: Even if your tenant is contracted to rent from you for the whole year, it is good practice to assume rental income for less than 12 months. Your tenant might move out early and you might spend 1 or 2 months looking for a new tenant.
  In this example, I use 10 months factor. You should use a suitable factor based on your own previous experience in renting out the property.
  
  
• Dividend: If the dividend has been declared, then fill this field, else leave blank.
  
  

Cash Out Flow (Expense/Spending)

Generally, we pay out money because we want to buy an asset or incur some expense. Regardless of whether you pay for an expense or an asset, it is still a cash out flow.

This is how to differentiate an expense from an asset.

• Any payment in exchange for a benefit that you can enjoy now is an expense. Example: Buying a DVD, food, clothes.
• Any payment in exchange for a benefit that you can enjoy in the future is an asset. Example: Education fund, retirement fund.
• Any payment in exchange for a benefit that you can enjoy now and the future plus you can reasonably sell it in a secondary market is an asset. Example: House, stocks, car, painting.
• An exception is your mortgage payment. Mortgage payments are made up of 2 parts. The first part is the interest and the second part is your loan. Paying the interest portion is an expense while the paying the loan portion is building up your asset base

• Tax: Remember to include periodic expenses such as property taxes, auto insurance, membership fee and so on. Do not let these expenses catch you off guard. You should examine credit card slips, check butts and bank statements for the past 1 to flag out these expenses.
  
  
• Energy and Utilities: Look at your bills for the past 1 year and average out the monthly expense. This is because utilities expense is affected by seasonal factors. When the weather is cold, you will turn up your thermostat and rack up your utility bill. The monthly average will provide a more reliable estimate of your expense. Do pay attention to other types of expenses which are seasonal.
  
  

If you are unsure how much you spend for some items, then you might want to download the Daily Expense Worksheet to help you compile your daily expenses. At the end of the month, you will have some reliable figures to work on.

When you have finished, you are ready to analyze your cash flow.

Next: Analyze Your Cashflow.

Previous: How Much Do You Need To Save?.