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Chapter 2: Money Management Strategy: Financial Statements and Budgeting,…
Chapter 2:
Money Management Strategy: Financial Statements and Budgeting
The Cash Flow Statement
Personal Financial Statements
Report your current financial position in relation to the value of the items you own and the amounts you owe
Measure your progress toward financial goals
Maintain information on your financial activities
STEP 1: RECORD INCOME
STEP 2: RECORD CASH OUTFLOWS
STEP 3: DETERMINE NET CASH FLOW
financial documents and money management activities
Money Management and Achieving Financial Goals
Budgeting for Skilled Money Management
The Budgeting Process
Step 7: Review Spending and Saving Patterns
Step 5: Budget Variable Expenses
Step 2: Estimate Income
Step 1: Set Financial Goals
Step 3: Budget An Emergency Fund and Savings
Step 6: Record Spending Amounts
Step 4: Budget Fixed Expenses
Characteristics of Successful Budgeting
Flexible
Clearly communicated.
Well planned.
Realistic
Types of Budgeting Systems
Mental budget: exists only in your head
Digital budget: may be created with a spreadsheet, software, website, or an app
Written budget: detailed plan for spending in a spreadsheet or notebook
Physical budget: use envelopes for your expenses such as food, rent, etc.
Where to keep your financial records?
Home Files, Home Computer or Online
safe deposit box.
personal computer
Personal Balance Sheet
STEP 1: LIST ITEMS OF VALUE
STEP 2: DETERMINE AMOUNTS OW
STEP 3: COMPUTE NET WORTH
Components of Money Management
-Financial Documents
-Financial Statements
-Budgeting