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18 Cards in this Set

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Personal Balance Sheet
balances & equations
* Net worth
* Total assets
snapshot
Net worth = assets – liabilities
Total assets = total liabilities + net worth
Balance sheet elements
Assets
* Investments
* Retirement
* Personal use assets
Liabilities
* Current
* Long-term
Net worth
Net worth
Total liabilities + net worth complete the right side of balance sheet, and must equal assets
Personal Cash Flow Statement
income actually received (cash inflows)during specific period of time & expenditures (cash outflows)
Cash inflow – cash outflow = cash surplus or discretionary income
Cash inflow
Earnings
Interest
Dividends
Deductions are reflected in outflow
Cash outflow
Living expenses
Asset purchases
Tax payments
Debt payments
Include only actuals – what is paid out in cash
With home mortgages, include insurance and taxes if in escrow account
Categories
Relationship between BS and Cash flow
Cash flow will show change in position btwn 2 balance sheet periods

Living expenses = cash flow
Asset is balance sheet
Example: a living expense (furniture) can be a cash outflow and an asset (balance sheet)
Reduction of cash
Decrease in liability
Increase asset
Increase cash outflow
cash surplus will . . .
Cash surplus will increase net worth
Emergency funds
Liquid assets accumulated for providing coverage during decrease in cash outflow
3 – 6 months
Cash and cash equivalent
Lines of credit do not substitute for emergency funds
CDs less than 90 day maturity
Life insurance cash value
Current ratio
Assets/liabilities
Higher ratio = better; greater ability to satisfy debts
Acid test ratio or quick ratio
Cash & cash equivalents & accounts receivables/current liabilities
Savings ratio
Cash surplus/net income (after taxes)

5-8%
Consumer debt ratio
Monthly consumer debt/net income
Housing cost ratio
Monthly payment (P&I) + insurance + taxes + HOA/monthly gross income
Total debt ratio
Housing + consumer + personal (eg alimony)/gross income
Personal record-keeping
Bank statements
Credit card statements
Insurance info and agents
Medical expenditures & records
Tax returns
Home improvements
Trusts
Wills
Employee benefits
Investments
balance sheet
personal financial status at a moment in time = snapshot