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Tracking income and expenses by creating a statement of cash flows

Tracking income and expenses and measuring them against a budget can be a tedious project. If you have seen the last two articles, How to create and maintain a budget and Creating a net worth statement, you may have determined that I am a big advocate for financial reporting. I think having a family is very similar to operating a small business. One of the essential tasks of running a business is analyzing monthly/yearly income and expenses known as the statement of cash flows.

While the net worth statement gives you a snapshot of your assets and liabilities at a specific time, the statement of cash flows tracks the inflows and outflows during a length of time. The analysis of those cash flows will provide a wealth of information about how you are running your family business. Are you running a surplus having the ability to choose how you invest in the family (save for a home, retirement and/or entertainment, etc..) or are running a deficit, going into debt and feel frustrated that you never seem to get ahead?

There are several apps to help track expenses and budget. Here is a link to a review of what the balance considers the best for 2018: Programs like Quicken and Xero (for Mac user) provide accounting and aggregating tools on your PC or Mac. Most of these apps and programs will aggregate your expenses and link with your bank accounts to give you a picture of spending versus your income. They can all be useful tools but I have not found one that does what I want it to do so I stay old school using an excel spreadsheet.

No matter what tools you choose I suggest creating the first iteration on paper, excel spreadsheet or google doc. I am always amazed to discover what my family spends in food alone.

  1. Label your doc for the time period the cash flow statement represents
  2. Lists all inflows
    1. Gross salaries
    2. Investment income from interest or dividends
    3. Any other income or gains
  3. List Outflows
    1. Savings and or investments
    2. Fixed non-discretionary ( mortgage, insurance, loans)
    3. Fixed discretionary ( cable, telephone and memberships)
    4. Variable non-discretionary (food, utilities, medical, child care)
    5. Taxes if you want to break it down further
  4. Net cash flows equals inflows - outflows

What to do next? Compare and analyze

Here are six ratios/rules of thumb when analyzing your net cash flows

Housing ratio less than 28%

  •  All monthly housing cost mortgage or rent, Insurance and interest / monthly gross income

Debt to income ratio less than 36%

  •  All monthly debts / gross income

Saving ratio no less than 10%

  • Saving per year / gross income

Emergency fund should be a minimum of 3 months for dual income families and 6 months for singe income families

  • liquid assets/non-discretionary expenses

Retirement savings ratio: %15 - %20 of gross income

Budget ratio

50 / 20/ 30


How do you compare national spending on the whole?

Why is this important?

Use the cash flow statement to analyze your family business and make adjustments to your spending, income or create a new budget. Financial statements will help you gain information about your financial situation to make informed decision and take control of family or personal finance.


Ask yourself some hard questions. What do I want to do? What am I willing to change or sacrifice to get what you want?

Hopefully this has been helpful! 

Stay tuned for future guides for academic and healthcare professionals to help them take control of their money. Future articles include: college planning, student loan debt and Why work with a CFP® Professional.


Want to get serious about taking control of your money?

Want someone else to do this for you?

Need a 2nd opinion?

Schedule a free initial visit here

Chip Hill, CFP® AAMS®

Financial Advisor

155 W Bell Ct

Lexington, Ky 40508

Cell: 859.948.8717

[email protected]



Investment adviser representative and registered representative of, and securities and investment advisory services offered through Voya Financial Advisors, Inc. (member SIPC).


*Neither Voya Financial Advisors nor its representatives offer tax or legal advice. Please consult with your tax and legal advisors regarding your individual situation.


Chill Financial Group is not a subsidiary nor controlled by Voya Financial Advisors.