Personal Cash Flow.

Many troubles in life can be attributed to not being prepared. A brief glimpse to history provides ample proof of this. And looking through the same history books, one will notice that victory doesn’t belong to the strongest, or the smartest or the biggest. It always belongs to the most prepared. Success always favours those who have a proper plan and execute it. 

To be financially successful, you must have a financial plan. The ability to earn is important but managing your finances is more important. 

Managing personal finances successfully requires a good financial plan. And a good financial plan always starts with the two most important documents that you must have. The first is a personal cash flow statement. The other is personal net worth statement. 

In this article we will look into personal cash flow. 

Cash flow statements have three sections: cash inflow, cash outflow and net cash flow. The first step is to select a period. For individuals, a month is the most common period because most people pay major bills on a monthly basis  

Cash Inflow.  Cash that flows from another party to your assets 

  • Salary 
  • Other Incomes such reimbursements, allowances or payments done to you, I.e gifts. 
  • Cash flow from your savings deposit, stocks, bonds, business and properties 

Cash Outflow. This refers to cash that flows from your assets to others. 

Net Cash Flow. Cash inflow minus cash outflow. Positive is a good sign, negative is not but it is not the end of the world. 

A cash flow statement provides a comprehensive look at overall spending habits. It could give insight into how and where you’re spending money. 

A cash flow is different from a budget in that a budget, outlines a spending plan based on that personal cash flow statement. After you’ve completed your cash flow statement, that information could be used to set a budget or to refine an existing budget. 

As you make changes to your budget, this could be a good opportunity to check in with your financial goals. Are your retirement plans on track? How about topping-up the emergency fund and solving the credit card payment issues that has been slowly accruing debt.  

The table below shows an example of a cashflow statement. 

Cash Flow Statement Monthly (RM) Annual (Monthly x 12)(RM) 
Cash Inflow    
Gross Salary 5,000 60,000 
Less EPF 550 6,600 
Less Tax 116.65 1,400 
           Less Socso 19.75 237 
           Less EIS 7.90 94.80 
Sub-Total 4,306  51,668  
Rental Income 1,200 14,400 
Others…………..)  – – 
  – – 
Total Cash Inflow 5,506 66,068 
Expenditure (Outflow)    
Food 600 3,600 
Clothing – 500 
House Loan 575 6,900 
Car Loan 700 8,400 
House Maintenance – 500 
Car Maintenance – 900 
Petrol 600 3,600 
Insurance 275 3,300 
Car Insurance (Annual)  1,200 
Entertainment 300 3600 
Holidays (Annual)  3000 
Books 100 1,200 
Medical/Pharmacy – 500 
Self -Care 100 1,200 
Supplements 200 2,400 
Others 1 …………………….. (Monthly) 
Others 2……………………… (Annual)  
Total Expenditure 3450 40,800 
NETT CASH FLOW  2,056 25,268 

The example shows a positive nett cash flow, with surplus of RM 2,056 monthly and RM 25, 268 annually. 

In this example the positive cash flow means there is cash to build an emergency fund to fall back on in case of unexpected event. And it also enables a position to seriously work towards financial goals. 

However, when creating a cash flow management plan, don’t be discouraged if it starts in the negative. 

The key is to understand how you are spending your money and determine what is essential, and what is luxury. . 

There are many useful programs out there to help you be diligent on your spending, however, working with a financial planner will allow you to explore where improvements and changes can and should be made.  

Personal cash flow management is an integral part of financial planning. Getting hold of your personal cash flow is like half the battle won for a better financial future.