More Related Content Similar to Managing Personal Finances (20) Managing Personal Finances2. MANAGING YOUR PERSONAL FINANCES
USING CASHFLOW DIAGRAMS
A Guide For Visualizing Your Financial Health
Joel Wenger
Invest Safely, LLC
The information contained in this guide is for informational and educational purposes only.
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3. WHAT ARE CASHFLOW DIAGRAMS?
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4. CASHFLOW DIAGRAMS ARE SKETCHES THAT SHOW HOW
YOUR CASH “FLOWS”
INCOME
EXPENSES
ASSETS LIABILITIES
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5. THE CONNECTIONS BETWEEN YOUR INCOME, EXPENSES,
ASSETS, & LIABILITIES DETERMINE YOUR FINANCIAL HEALTH
REGARDLESS
OF INCOME
WE ALL HAVE
EXPENSES
IT’S A FACT OF EVERYDAY LIFE
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6. WHY ARE CASHFLOW DIAGRAMS IMPORTANT?
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7. THE MAIN DIFFERENCE BETWEEN GOOD AND BAD
FINANCIAL HEALTH IS…
INCOME
EXPENSES
ASSETS LIABILITIES
THE RELATIONSHIP BETWEEN YOUR INCOME &EXPENSES.
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8. THE CASHFLOW PATTERN OF BAD FINANCIAL HEALTH
~ INCOME IS SPENT IMMEDIATELY ~
INCOME
EXPENSES
ASSETS LIABILITIES
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9. THE CASHFLOW PATTERN OF AVERAGE FINANCIAL HEALTH
~ INCOME IS USED TO GET “CREDIT” (DEBT) ~
INCOME
EXPENSES
ASSETS LIABILITIES
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10. THE CASHFLOW PATTERN OF GOOD FINANCIAL HEALTH
~ INCOME IS USED PAYING OFF DEBT & BUYING ASSETS ~
INCOME
EXPENSES
ASSETS LIABILITIES
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11. THE CASHFLOW PATTERN OF EXCELLENT FINANCIAL HEALTH
~ DEBT IS PAID OFF & INCOME IS USED TO BUY MORE ASSETS ~
INCOME
EXPENSES
ASSETS LIABILITIES
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12. THE CASHFLOW PATTERN OF FINANCIAL INDEPENDENCE
~ ASSETS CREATE THE INCOME USED TO PAY EXPENSES ~
INCOME
EXPENSES
ASSETS LIABILITIES
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13. SUMMARY
Regardless of income, we all have expenses; it’s a fact of everyday life. The
main difference between good and bad financial health is how we pay for our
expenses.
Bad financial health
• Expenses account for all your income each month, you use credit cards
to pay bills, and/or borrow money to maintain your lifestyle
Average Financial Health
• A “higher” income, and a “higher” level of debt, which generates
“higher” monthly expenses
Good Financial Health
• Income is used to buy assets (such as an investment in dividend stocks)
and pay off debts
Excellent Financial Health
• Debts are paid off and extra income goes towards buying more assets
Financial Freedom
• Expenses are paid by assets that create income (i.e. dividend stocks)
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14. FOR MORE INFORMATION…
www.invest-safely.com
blog.invest-safely.com
/InvestSafely
@InvestSafely
/InvestSafely
www.invest-safely.com/safe-investing.xml
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15. INVEST SAFELY, LLC
http://www.invest-safely.com
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"As to methods there may be a million and then some, but
principles are few. The man who grasps principles can
successfully select his own methods. The man who tries
methods, ignoring principles, is sure to have trouble."
- Ralph Waldo Emerson