HDFS 357 1st Edition Lecture 3 Outline of Last Lecture I II Continuation of Personal Financial Planning Time Value of Money Chapter 3 I Personal Financial Records a File b Safe c Computer Outline of Current Lecture II I II How Long to Keep Personal Financial Records Personal Financial Statements a Balance Sheet b Cash Flow Statement Budgeting Current Lecture 1 How long Birth certificates wills and Social Security information indefinitely Records on personal property and investments as long as you own them Documents related to the purchase and sale of real estate indefinitely Copies of tax returns and supporting data six years 2 Personal Financial Statements Purpose Maintain information on your financial activities Balance Sheet General Overview of Finances Where are you now financially What you own what you owe Net worth Step 1 Listing Items of Value Assets what you own Ex real estate personal possessions vehicles furniture investment assets Step 2 Determining Amounts Owed Liabilities what you owe Current liabilities things that need to be paid off in less than a year Ex Credit Card payment Long term liabilities things that need to be paid off in more than a year Ex Student loans Step 3 Computing Net Worth Assets Liabilities Net Worth Net worth is an indication of financial position Cash Flow Statement Cash Flow is the actual inflow and outflow for a given time period Total cash received during a time period Cash outflows during the time period Cash surplus or deficit Step 1 Record Income Wages salaries and commissions Self employment business income Savings and Investment Income Gifts grants scholarships and educational loans Government payments such as Social Security public assistance or unemployment benefits Amounts received from pension and retirement programs Alimony and child support payments Step 2 Record Cash Outflows Fixed Expenses set Ex rent car payment phone bill etc Variable Expenses unpredictable Electricity groceries shopping fuel etc Step 3 Determine Net Cash Flow The difference between income and outflows can either be positive or negative deficit Cash flow statement provides the foundation for preparing and implementing a spend saving and investment plan 3 Budgeting A budget is a spending plan Selecting a Budgeting System Which one works for you Mental budget in your head Physical Budget use envelopes cash for your expenses such as food rent etc Written Budget use spreadsheets piece of paper Computerized budget use software Quicken Online Budget use website mint com Budget App phone tablet app check dollarbird