What is personal cash flow statement {full information}

In this article you will know all about personal cash flow statement.

In fact I included some powerful tips too.

So, ready to jump into the article.

What is personal cash flow statement

Personal cash flow statement is just a normal sheet which includes your income source and expense.

Question is why it’s necessary?

Imagine, you wake up and know that your wallet is empty and all of your income went to go in expense.

Now you don’t know where I spent all of the money. Here the cash flow statement works.

Let’s understand a little deep down.

Cash flow statement is used in the business field to note down where cash is coming and where it is going.

But when an individual or family used this methodology called a personal cash flow statement.

In this method it is divided into three parts.

Cash inflow: means a cash is coming to your account.

Cash outflow: means a cash which goes from your account.

Cash netflow: it is total inflow and outflow.

How to create personal cash flow statement

Creating a personal cash flow statement is not rocket science. We just need to look at our income and Expenses. It will give us a clear idea of how and where our money comes from and how we spend it.

It is possible that your income and Expenses are different every month. So taking a few months on average , especially 6 months, is good to calculate cash flow.

As I told you above we will consider three parts of this sheet. So let’s start from one.

Cash inflow: it has your income which comes to your account. The money that comes to you is written as cash inflow. In general case it has been your salary and sometimes with the side hustle.

So just think and note down where your money comes from.

Some of examples are below down:

• Monthly salary
• Rent collection
• Side hustle
• Sales of stock and bonds
• Sales of asset (car, house)

Cash outflow: as we consider where Money comes, like that we need to know that where money gone. It includes our expenses such as rent and groceries. Another some example are:

• Mortgage
• Rent
• Entertainment
• Streaming service
• Groceries

Cash netflow: cash netflow is the total flow of your money. We can find out with use of cash inflow and outflow.

Just minus the value of cash outflow from inflow and you will get total cash flow. Which shows how much money is left for you from a specific period.

Formula:

Cash flow = cash inflow – cash outflow

This formula indicates your financial condition. If this value comes positive, it means you have left some money after paying all of the stuff and you can use that money for your retirement savings, extra entertainment or buy something that you want.

But if cash flow value shows a negative value means your cash flow is negative and as it sounds its not good for your financial situation.

You spend more compared to what you earn and it can create problems for you in the near future.

And that’s why I add the next chapter on improvement of cash flow.

No matter what your personal cash flow position (positive or negative) is, it is alway be great step to improve.

How to improve personal cash flow statement

You create a statement and analyse your incoming and outgoing. But it’s all useless if we can’t get benefits from this sheet.

Using these personal cash flow tips we improve our net cash flow towards positive to free from financial condition.

Let’s start with the first one.

Blast expenses: have you read all your expenses. Just think about whether your expenses and spending are going to be worth it. You can cut out extra streaming service or change internet plans to cheaper ones.

You may reduce eating outside and spend less on shopping. If your rent is very high then think about shifting to a cheaper place.

Increase inflow: most of us have only one income source which is mostly salary. But the idea is to find a second source of income. I mentioned some ways for you.

1. Side hustle (ex: driving)
2. Work Little overtime
3. Investing in stocks
4. Rent a home or room

Create a budget: one of the best ways to get a financial goal is creating a budget. It’s different from the personal cash flow statement.

Where we note down already spent and earned in statement other side budget is show us how much we have money and where we should spend or not.

50-30-20 technique: use your 50% money on necessary things such as rent, groceries and internet bills.

Next 30% spend on a good life or what you want. Example for clothes, entertainment and movie tickets.

Finally, the last 20% go into a savings account which will be stored for your future. In case you will need big expenses such as an emergency fund or medical bill.

Conclusion

Here was all the information about the personal cash flow statement.

Now your turn, how you will use that statement.

Tell me in the comment section.