Cash rules everything around me.
wu tang clan
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After calculating your net worth with a balance sheet the next step to understanding your financial wellness is measuring your cash flow using an income statement.
This spreadsheet will map out all of your expected income and expenses throughout the year to identify shortfalls or excess cash flow.
How to calculate net cash flow
Net cash flow is what remains after your savings, debt payments, insurance premiums, living expenses and tax obligations.
Inflows – outflows = net cash flow
What you do with extra money is up to you!
Download my free income statement (.xlsx) to calculate your net cash flow.
What are inflows?
Inflows are all the expected recurring sources of income throughout the year.
Examples include:
- 1099 self-employment
- Royalties
- W2 salary
- Bonus
- Business income
- Dividends
- Interest
- Pension
- Retirement account withdrawals
- Alimony received
Use bank statements, 1099 or W2 forms, tax returns, or personal income spreadsheet to estimate your annual income from all sources. Include all sources of income to calculate your total expected cash inflows.
Download my free income statement (.xlsx) to calculate your net cash flow.
What are outflows?
Outflows are a combination of recurring savings, expenses and taxes. The total outflows will offset against your total inflows to calculate your net cash flow.
Savings
Saving is important to achieve your short and long term financial goals. Report all of your expected recurring contributions into any savings or investment accounts.
Examples include:
- Emergency fund
- Traditional or Roth IRAs
- SEP IRA
- Solo 401(k) plan
- Taxable brokerage
- 403(b) plan
- 457(b) plan
- 529 education savings plan
- ESPP (employee stock purchase plan)
- Reinvested dividends, interest or capital gains
Pro tip: Set up automatic savings to “pay yourself first” before spending any remaining income.
Debt payments
Add up all of your recurring debt payments including any mortgages, loans or credit card payments.
Examples include:
- Personal mortgage
- Rental real estate mortgage
- HELOC
- Auto loan
- Student loan
- Credit card payments
- Personal loan
- Business loan
Insurance payments
Insurance protects you from risks in life that could lead to financial ruin. Download or request insurance policies to add up your insurance premiums.
Examples include:
- Homeowners
- Renters
- Auto
- Personal umbrella liability
- Business liability
- Life
- Disability
- Long term care
- Personal valuables (instruments)
Living expenses
Living expenses are sometimes tricky to measure. Either download your bank and credit card statements or connect your accounts to a financial software to view your spending.
Your best guess is typically far from reality when it comes to living expenses so make sure to get this section right. Categorize your living expenses however you see fit.
Examples include:
- Auto and transport
- Bills and utilities
- Business
- Charitable giving
- Dining out
- Education
- Entertainment
- Fees and charges
- Gifts
- Groceries
- Health and fitness
- Housing
- Kids
- Miscelleaneous
- Pets
- Shopping
- Travel
Taxes
Taxes are one of our largest expenses in life. Take a look at your most recent tax return (or paystubs for W2 employees) to see what you paid last year. This is a good starting point for estimating your tax obligation next year.
Examples include:
- Federal income
- State income
- FICA (Social security and medicare) – 7.65%
- Property
Download my free income statement (.xlsx) to calculate your net cash flow.
What to do with net cash flow
You entered all of your expected income and expenses. Now what?
Negative
If your income statement reflects negative cash flow then that money has to come from somewhere. Either from a savings account or by accruing debt with a credit card or loan.
Another option is to adjust your income or expenses. Find ways to increase your income and/or reduce your expenses this year.
Positive
If your income statement reflects positive cash flow then you have extra money to spend. Take careful consideration as the weight of financial responsibility can be exciting yet daunting.
Examples include:
- Build your emergency fund
- Payoff high interest debt
- Save for the future
- Reinvest in your business
- Treat yourself (with a % of extra money
- Give back
Positive cash flow gives you the flexibility and peace of mind to live in freedom.
Keep thriving!
Download my free income statement (.xlsx) to calculate your net cash flow.
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