managing personal finances
DESCRIPTION
Visualize your financial health using cashflow diagrams.TRANSCRIPT
www.invest-safely.com
Copyright © Invest Safely, LLC. All Rights Reserved www.invest-safely.com 2
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.
Copyright © Invest Safely, LLC. All Rights Reserved www.invest-safely.com 3
WHAT ARE CASHFLOW DIAGRAMS?
Copyright © Invest Safely, LLC. All Rights Reserved www.invest-safely.com 4
INCOME
EXPENSES
ASSETS LIABILITIES
CASHFLOW DIAGRAMS ARE SKETCHES THAT SHOW HOW
YOUR CASH “FLOWS”
Copyright © Invest Safely, LLC. All Rights Reserved www.invest-safely.com 5
THE CONNECTIONS BETWEEN YOUR INCOME, EXPENSES,
ASSETS, & LIABILITIES DETERMINE YOUR FINANCIAL HEALTH
WE ALL HAVE
EXPENSES
REGARDLESS
OF INCOME
IT’S A FACT OF EVERYDAY LIFE
Copyright © Invest Safely, LLC. All Rights Reserved www.invest-safely.com 6
WHY ARE CASHFLOW DIAGRAMS IMPORTANT?
Copyright © Invest Safely, LLC. All Rights Reserved www.invest-safely.com 7
INCOME
EXPENSES
ASSETS LIABILITIES
THE MAIN DIFFERENCE BETWEEN GOOD AND BAD
FINANCIAL HEALTH IS…
THE RELATIONSHIP BETWEEN YOUR INCOME &EXPENSES.
Copyright © Invest Safely, LLC. All Rights Reserved www.invest-safely.com 8
INCOME
EXPENSES
ASSETS LIABILITIES
THE CASHFLOW PATTERN OF BAD FINANCIAL HEALTH ~ INCOME IS SPENT IMMEDIATELY ~
Copyright © Invest Safely, LLC. All Rights Reserved www.invest-safely.com 9
INCOME
EXPENSES
ASSETS LIABILITIES
THE CASHFLOW PATTERN OF AVERAGE FINANCIAL HEALTH ~ INCOME IS USED TO GET “CREDIT” (DEBT) ~
Copyright © Invest Safely, LLC. All Rights Reserved www.invest-safely.com 10
INCOME
EXPENSES
ASSETS LIABILITIES
THE CASHFLOW PATTERN OF GOOD FINANCIAL HEALTH ~ INCOME IS USED PAYING OFF DEBT & BUYING ASSETS ~
Copyright © Invest Safely, LLC. All Rights Reserved www.invest-safely.com 11
INCOME
EXPENSES
ASSETS LIABILITIES
THE CASHFLOW PATTERN OF EXCELLENT FINANCIAL HEALTH ~ DEBT IS PAID OFF & INCOME IS USED TO BUY MORE ASSETS ~
Copyright © Invest Safely, LLC. All Rights Reserved www.invest-safely.com 12
INCOME
EXPENSES
ASSETS LIABILITIES
THE CASHFLOW PATTERN OF FINANCIAL INDEPENDENCE ~ ASSETS CREATE THE INCOME USED TO PAY EXPENSES ~
Copyright © Invest Safely, LLC. All Rights Reserved www.invest-safely.com 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)
Copyright © Invest Safely, LLC. All Rights Reserved www.invest-safely.com 14
FOR MORE INFORMATION…
www.invest-safely.com
blog.invest-safely.com
/InvestSafely
@InvestSafely
www.invest-safely.com/safe-investing.xml
/InvestSafely
"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
TM
INVEST SAFELY, LLC
http://www.invest-safely.com