What is a cash flow statement? How is it useful?

Unlike a net worth statement that provides a snapshot of your financial picture, a cash flow statement reviews your income and expenses to provide awareness of where your resources are going and if they align with your goals.

To get a good sense of your cash flow, I suggest looking at a full year of your income and spending.

If you don’t have the time to assemble and review all of your bank and credit card statements, consider automating the calculation of your spending using a financial aggregating app, like Mint. This app is user-friendly and brings all your finances together so you can easily see where your money goes.

Your income might include your paycheques, government benefits, investment or business income.

And your expenses can be divided between fixed costs (like mortgage or rent, and car loans) and variable costs (like entertainment and clothing.)

Once your cash flow statement is complete, you’ll see that either your cash flow is negative, which means more money is going out than coming in, or that your cash flow is positive; more money is coming in than going out.

If there is more money coming in, consider increasing your monthly savings to speed up the timeline toward your goals. And if there is more money going out, you may need to consider strategies to bring your cash flow into balance.

If you fall into the latter group, I have another article for you.

You can access Victoria’s cash flow workbook by clicking here.

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