What's your Cashflow Statement?

You have understood your Networth by now

[if not, read earlier blog  What's your Networth]

Do you know what is Cashflow statement?
In simple terms a cashflow statement will help you determine all the incoming and outgoing flows of money for a period. In this case, for personal finance perspective, i would rather like to define this time period as month. And this simplifies it further:

Typical inflows:
Salary Income, Rental Income, Business Income, Interest Income, Dividend Income etc.

Typical Outflows:
All the different EMIs for loans, your expenses, be it travel, food, entertainment, utilities, addictions etc. and Savings.

Balance:
Whatever is left in the pond, I mean this is inflows - outflows.

Now, typically your outflows should never be more than your inflows, else you are progressing towards the bigger mess with each passing hour.

Also, note that you should not really have too much left in the pond, that's waste of money .. as cash holdings are the most in-efficient way to use money.

Let's cut short the talk and let me come back to cash flow statement. Here is a sample one

Cashflow statament, Income equals savings plus emi plus expenses

This kind of monthly cashflow statement will immediately tell you what percentage of your income is going in EMIs and Expenses (divide your annual expenses by 12), what you are typically saving and what's sitting idle in your bank accounts. 

A further note, while filling out the items above do not forget the golden rule "Always make conservative estimates of your inflows and Generous estimate of your outflows", and this is obviously when you don't know the exacts. 

And you are half way done.