Cash Flow Statement
One of the first items I look at when reviewing a company is the cash flow statement. It is very difficult to ‘manipulate’ a cash flow statement without a savvy investor spotting it.
Every individual should make their own cash flow statement. It answers the following questions:
How much money is coming in?
How much money is going out?
Here is a hypothetical cash flow statement for a single male making about 70K per year:
| Monthly | Yearly | Comment | |
| Total net income From Job | $4,500 | $54,000 | Always Use your Net Pay. (After Taxes) |
| Total Rental Income | $500 | $6,000 | Rental properties you may own |
| Car insurance | -$252 | -$3,021 | |
| Hair Cut | -$30 | -$360 | |
| Gas Work | -$100 | -$1,200 | |
| Food | -$400 | -$4,800 | |
| Cell Phone | -$135 | -$1,620 | |
| Rent | -$1,100 | -$13,200 | |
| Electric Bill | -$85 | -$1,020 | |
| Water Bill | -$60 | -$720 | |
| Internet Bill | -$82 | -$981 | |
| Health Insurance | -$80 | -$960 | Include if you do not get insurance via company |
| Play money | -$1,000 | -$12,000 | Include a buffer. Vacations, movies, etc. |
| Total Saved | $1,677 | $20,119 | |
| Total Spent | -$3,323 | -$39,881 |
Include everything you spend money on. Your biggest expense will be taxes. Always use your net pay, which is your payment after taxes. For most, the biggest net income will come from your employer. Include an item for “play” money. We all want to enjoy life. This can be broken down further into vacations, shows, nightclubs, etc.
Now you can see where you are wasting money. You can also see how to improve your cash flow statement. Hopefully, you are saving the amount your cash flow statement says each year. If not, than your cash flow statement is wrong and it must be fixed.
Next step is to have a goal. What will you do with your saved money? Invest it? Buy a house? For those who save, very few know what they are saving for. Most want to buy a house. This is typical of most middle and lower class people. After they buy a house they don’t know what to do. They wind up squandering their money on expensive items, such as cars, fancy TV’s and surround sound stereo systems. No one can tell you what your goals are. You must figure that out for yourself.
Time Flow Statement
Far more important than your cash flow statement is your time flow statement. Time is more valuable than money. If you don’t believe me ask yourself this question:
Would I rather be 18 and broke or 80 and a billionaire?
The answer to this question will put how you spend your time into perspective. Most people squander their time. Interestingly, most people do not want to be like most people. They want to be in the 1%. They want fame and/or fortune. When you act like most people you will wind up just like them. Why would you expect a different outcome?
What are you spending your free time doing? Has it yielded any monetary income? Is it giving you a good reputation? If not, why? Possible answers to these questions are the following:
1-You are not good enough. There is a point were you are just wasting your time. You must face a realization that you are not that good. This is very difficult for most.
2-What you are driving too is a dead end. Think if Beethoven was alive today. Would he be laughed at or held up as a genius? If Beethoven wrote the fifth symphony today, in the year 2018, would you ever hear it? Would you know the name Beethoven?
3-You are terrible at marketing. I don’t care how much of a genius you are in a particular field. If you do not understand marketing you will be in the dark corner of the room.
4- You are not dedicated. How many times do you start something and not finish? How often do you not follow through?
Make a time flow statement. How much time per day will you dedicate to a task outside of your job? Have the dedication to stick to it. Your time flow statement will be ever changing. Hopefully, you realize very quickly what is a waste and what is fruitful.
Most people do not think about these things. They watch reruns of Seinfeld in their spare time. They play candy crush. They browse Facebook for hours and hours. There is nothing wrong with these people. They are just different from me. Hopefully, if you want to be in the top 20% in your field, you are different from them.