cash flow work sheet

Cash Flow Planning Bonus Project

 

Plan Ahead

We are told, in business, that we should be proactive; and broadly what is meant by that is to focus our efforts and attention on the long-term and to think in terms of the long-term consequences of our actions.

Proactive people simply will not accept that there is nothing that can be done about the unreasonable boss or the events of daily life - they will point out that there are always choices. It is by the decisions we make, our responses to people, events and circumstances that proactive people can and do affect the future. We may have no control over what life throws at us but we always have a choice about how we are to respond. —Stephen Covey's landmark book The 7 Habits of Highly Effective People

 

The purpose of creating a Cash Flow Plan is to spend your paycheck on paper before you actually spend it during the month

 

 

Remember:

 Money is active and always moving

 Wealth is no longer measured in what you make a year

 Wealth is measured in what you do with your money during a year

 You will either be on your way to being wealthy, broke, or poor

 

Give your money a name

 Rent/Mortgage, food, utilities, taxes, insurance, etc.

 Money that is simply left unaccounted for will always find a way out of your personal financial plan

 

This Cash Flow Plan should be done every pay period!

 

  Recommended Percentages used for Budgeting

The following are a compilation of several sources to derive the suggested percentage guidelines. However, these are only recommended percentages and will change dramatically if you have a very high or very low income.

For instance, if you have a very low income, your necessities percentages will be high. If you have a high income your necessities will be a lower percentage of income and hopefully savings (not debt) will be higher than recommended.

ITEM ACTUAL % RECOMMENDED %

CHARITABLE GIFTS _________ 10%

SAVING _________ 5-10%

HOUSING _________ 25 -35%

UTILITIES _________ 10-15%

FOOD _________ 15%

TRANSPORTATION _________ 10%

CLOTHING _________ 2-7%

MEDICAL/HEALTH _________ 5-10%

PERSONAL _________ 5-10%

RECREATION _________ 5%

DEBTS _________ 5-10%

Cash Flow Planning

 

Every dollar of your income should be allocated to some category on this sheet. Money "left over" should be put back into a category even if you make up a new category. You are making the spending decisions ahead of time here. Almost every category (except debt) should have some dollar amount in it.

 

Fill in the amount for each subcategory under "Subtotal" and then the total each main category under "Total." As you go through your first month, fill in the "Actually Spent" column with your real expenses or the saving you did for that area. If there is a substantial difference in the plan versus the reality something has to give. You will either have to adjust the amount allocated to that area up and another down or you will have to better control your spending in that area.

 An asterisk (*) beside an item means you should consider using a "cash envelope system" these are items that you would pay in cash.

 Hint: By paying in cash, you will become more emotionally involved in what you are actually doing with your money, which will lead you to start saving money!

 

(1) Emergency Fund should get ALL the savings until 36 months of expenses have been saved.

 

Note: Savings should be increased as you get closer to being debt free.

 

Hint: By saving early for Christmas and other gifts, you can get great buys and give better gifts for the same money.

 

Your assignment is to construct a cash-flow plan for yourself.

· Complete the following worksheet

· Answer the remaining questions at the end

· Save project with your name in the filename

· Example: Randy Saleh cash flow bonus project

· This project is worth up to 20 points added to your point total for the class

Note: If you are not yet fully-employed, give yourself the following:

· $47,000 annual income with full-benefits (Great first job!)

· This equates to a monthly take home pay of: $2,545.00

· Your Apartment/Housing will range $750 - $1,250 per month

· Your Utilities for electricity & water will be a minimum of $150 | Internet/Cable $150

· Average car payment in America is $450 so plan somewhere around that number—buying a good used car can get you around $300/mo. | Car Insurance of at least $85/mo. | Gas/oil/ repairs/license will be around $150/mo. Add an extra $40 for tolls!!

· I think you can figure out the rest!

Note: If you are still living at home with your parents (genius move btw) save at least $10,000 in your emergency fund and pay off your student loans before moving out! Life will be such much less stressful if you can do this.

Just input numbers for Sub Total and Total columns

Create Your Cash-Flow Pan

Budgeted Item	Sub Total	Total	Actually Spent	Difference
Charitable Gifts
Saving
Emergency Fund (1)
Retirement Fund
College Fund
Housing
First Mortgage/Rent
Real Estate Taxes
Homeowners Ins.
*Repairs
Utilities
Electricity
Water
Gas
Phone & Internet & TV
Water/trash
Food
*Grocery
*Restaurants
Transportation
Car Payment
*Gasoline & Oil
*Repairs & Tires
Car Insurance
License and Fees
Page 1 Totals

Budgeted Item	Sub Total	Total	Actually Spent	Difference
*Clothing
*Cleaning/Laundry
Medical Insurance
Disability Insurance
Health Insurance
Doctor Bills
Dentist
Prescriptions
Personal
Life Insurance
Child Care
*Toiletries
*Cosmetics
*Hair Care
School tuition
School Supplies
Child Support
Subscriptions
*Gifts (include Christmas)
Miscellaneous
*Blow $$$$
Page 2 Totals

Budgeted Item	Sub Total	Total	Actually Spent	Difference
Recreation
*Entertainment
*Vacation
Debts (hopefully $0)
Visa 1
Visa 2
MasterCard 1
MasterCard 2
American Express
Dept Store 1
Dept Store 2
*Use cash to pay for these purchases—you will usually not spend as much when using cash because cash is emotional. There is little emotion when “swiping” a credit/debit card for purchases			You will need to add these numbers with your calculator
Page 3 total
Page 2 Total
Page 1 Total
Grand total expenses
Total Income
Difference		This number should be $0

With cash flow planning, every dollar has a name, and every dollar is accounted for.

Note: It will probably take at least 3 months to get this right...Do not get discouraged, it will work!

 

 Now answer these questions:

We are living through a global personal finance implosion that began in the early 2006 and might not end until 2020—if it ends at all. A major reason for this catastrophe in America and other countries is that a majority of people have an unsustainable car and house payment. We are basically living too large in comparison to our monthly budget.

1. Take your car payment—including gas & oil, insurance, and repairs, and divide it by your total income for the month. What percentage of monthly income is your car expense?

a. If this amount is more than 20%, do you think that this is a reasonable/sustainable expense for your monthly budget—why or why not?

Type your answer here

i. Too many American families have car expenses that exceed much more than 20% of their monthly budgets—this is a good way to go broke. List some ideas to lower your expenses in this area.

Type your answer here

b. If your car expenses are 15% or less of your monthly budget, then you have a sustainable car expense. What are you doing to keep your expenses down in this area?

i. List some ideas to lower your expenses in this area

Type your answer here

2. Take your house/rent payment—including repairs, insurance, and property taxes, and divide by your total income for the month. What percentage of monthly income is your housing expense?

a. If this amount is greater than 35% of your monthly budget, do you think that this is a reasonable/sustainable expense for your monthly budget?

Type your answer here

i. Too many American families have housing expenses that exceed much more than 35% of their monthly budgets. According to the Wall Street Journal, 30% of all mortgages in America are “under water,” meaning the mortgage is more than the house is worth.

ii. List some ideas to lower your expenses in this area.

Type your answer here

b. If your housing expenses are 34% or less of your monthly budget (lower the better), than you have a sustainable housing expense. What are you doing to keep your expenses down in this area?

i. List some ideas to lower your expenses in this area

Type your answer here

3. Take your food expenses for the month and divide by your monthly budget. Is this amount a reasonable number to provide you and your family healthy food for 30 days?

a. Food prices have really been going up this year. List five ways you can reduce your food budget without skimping on nutrition.

b. Is it feasible for you to grow some of your own food by having a garden?

Type your answer here

4. Looking back at your budget, what other areas can you reduce expenses?

Type your answer here

5. Finally, list at least two ways that you can increase your monthly income.

Type your answer here

As times get tougher, and friends it looks like economy is likely to get worse before it gets better, you can look back at this exercise to find strategies that will help ride out this storm.

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