Personal Budget Balance Sheet, Cash Flow

Topics: Balance sheet, Asset, Debt Pages: 5 (815 words) Published: April 7, 2014
Personal Budget, Balance Sheet, and Cash Flow Statement

To:Mr. Christopher De Maline
Re:Personal Budget, Balance Sheet, and Cash Flow Statement

Dear Mr. De Maline,

Saving money is extremely important however; some people do not have healthy savings thus leading them to financial instability. Therefore, being a good steward over your finances should be consistent and begin at an early age and progress as you age. This will provide an effective growth pattern to allow future financial security.

The purpose of this memorandum is to evaluate my client’s financial outlook, their personal budget, balance sheet, and cash flow statement and provide recommendations for improvement of their financial situation.

My client, Chauncey Latham is 51 years old and a police officer. He is married and has one dependent. Kyle Latham, Chauncey’s wife is 47 years old and is currently not working. Prior to her unemployment, Kyle annual earnings were $96,000 a year. They live is a nice 4-bedroom house, in a great community with a sought after school district. The family has a comfortable looking life, though their financial outlook is pretty grim. Together Chauncey and Kyle earn $85,000 a year, which includes Chauncey’s off duty work and Kyle’s unemployment benefit. Their life savings have dwindled down the emergency fund is very low, and their credit card debt is high.

The balance sheets show my clients assets and liabilities and verify their net worth. Any property including jewelry or saleable items is considered assets and can produce income. The asset value should have a fair market value, which means the amount of money they would have today if sold. Conversely, liabilities are debts that decrease the net worth.

Balance Sheet of December 31st, 2013
Liquid assets
Checking account balance $ 4,000
Savings $ 5,000
Money market account $ 11,000
Cash value of life insurance $ 250,000
Total liquid assets $ 270,000
Household assets
Current market value of home $ 235,000
Market value of vehicles $ 28,000
Jewelry $ 25,000
Studio/Stereo equipment $ 15,000
Total household assets $ 303,000

Investment assets
Individual retirement accounts $ 150,000
College certificate $ 10,000
Total investment assets $ 160,000
Total assets $ 733,000
Current Liabilities
Credit card balances $ 20,000
Car loan $ 16,000
Student loans $ 120,000
Personal loan $ 15,000
Mortgage $ 201,000
Total Liabilities $ 372,000
Net worth (assets minus liabilities) $ 361,000

To improve my client's understanding of their finances, I am recommending that a cash flow statement be created. Because some people are unaware of their financial outlook, creating a cash flow statement will provide the structure needed, thus providing information such as where the money is going and how much is remaining at the end of the month. A plus to developing a cash flow statement is the ability to analyze the fixed expenses with the income and savings and modify as needed.

Latham's cash flow statement.
Monthly cash flow statement for December 31st, 2013
Cash Outflows:
Mortgage $ 1,400
Property taxes $ 3,063
Car loan payment $ 565
Students loan $ 485

Credit card payments $ 600
Car/house/life insurance $ 250
Power $ 200
Water $ 70
Telephone $ 265
Gas/Transportation $ 400
Food $ 800
Clothing $ 100
Medical expenses $ 150
Entertainment $ 100
Gifts/donations $ 300
Total Outflows $ 8,748
Allocation of surplus:
Savings (Emergency Fund) $ 800
Saving Goal $ 300
Surplus $1,100

The next recommendation would be to develop a personal budget for the Latham's. This will allow them to have the proper foundation to establish strong...

References: eHow. (2014). Retrieved from
Jack R. Kapoor, L. R. (2009). Personal Finance. In L. R. Jack R. Kapoor, Personal Financial Planner (pp. 1-69). McGraw-Hill Company.
Continue Reading

Please join StudyMode to read the full document

You May Also Find These Documents Helpful

  • Balance Sheet and Cash Flows Essay
  • Balance Sheet and Free Cash Flows Essay
  • Balance Sheets Income Statements And Statements Of Cash Flow Essay
  • Chapter 5 Balance Sheet and Statement of Cash Flows Essay
  • cash budget Essay
  • Cash Budget Essay
  • Essay on Cash Budget
  • Balance Sheet and Cash Essay

Become a StudyMode Member

Sign Up - It's Free