Money is an important resource in our lives.  It is an object we use to obtain the things we need to live our lives. We use it to provide housing, food, transportation, clothing, health care, education, entertainment and other things needed to sustain our daily lives. 

Money Management is the process of managing ourselves with respect to the way we use money.  We manage how we bring in income, the amount of income we bring in, and the way we spend it.  The way we manage income and expenses determines how much money we have.

Tools for Observing What We Do With Our Money

There are two financial best practices that create the foundation for building financial well being.

1.  Manage cash flow to create enough income to fund our life needs and have money left over to save.
2. Use the money we save to build our net worth annually.

There are two tools we can use to inventory and assess how we manage our money.  The two tools are the cash flow worksheet and the net worth worksheet.

Cash Flow

The cash flow worksheet is a tool we can use to write down and take a look at the amount of money we have coming in and going out.  Click on the Cash Flow Worksheet link below to view the cash flow worksheet.  This is a spreadsheet that you can click on and use to write down the amount of money you have coming in and the amount of money you are spending.  The difference between what you earn and what you spend is your net cash flow.

Cash Flow Worksheet

What is your net cash flow?

Use the Cash Flow Worksheet to observe your income and expenses.

• How much is your income?
  • How often are you paid?  Sometimes we are paid daily, weekly, twice a month, every other week, randomly or annually.  The number of columns you use will depend on how often you receive income to track you income for the month.
  • Write the date you are paid.
  • Write down the amount of your take-home pay – the amount of money you have available to spend.
• What are your expenses?
  • Determine your expenses.
  • In the “Spent column”, write the amount you spend in each expense category.  Examples of items in each category are listed at the bottom of the worksheet.
  • Total your expenses.
• What is your net cash flow?  Subtract your expenses from your income to determine your net cash flow.
• If you see changes you would like to make, note the changes in the “Plan” column.

What is your income?

• What are your sources of income?
  • Earnings from wages, salary, tips, commission
  • Unemployment
  • Investment interest, dividends, rent
  • Gifts
  • Annuities, social security, retirement benefits, veterans benefits, supplemental security income
  • Public assistance
  • Child support or alimony
  • Profits from business, investments or farm
  • Money received from relatives or friends
  • Loan proceeds
• How frequently do you receive your income?  Frequency can be daily, weekly, biweekly, twice a month, once a month, seasonally, or annually.
• How much do you get from each source?  List the amount of income you receive from each source.
• Use the Sources of income Worksheet to determine how much income you have.  Sources of Income Worksheet

Track your spending

If you don’t know what your expenses are, track your spending for a few days to see where and how much you spend.

A Spending Tracker Worksheet is a tool you can use to see where you are spending.  Click on the Spending Tracker Worksheet below and use it to track and observe where you are spending your money.

Spending Tracker Worksheet

Net Worth      

The net worth worksheet is a tool we can use to write down what we own and what we owe.  Click on the Net Worth Worksheet link below to view the net worth worksheet.  This is a spreadsheet that you can click on and use to write down the value of what you own and the amount of debt you owe.  The difference between the value of what you own and the amount you owe is your net worth.

Net Worth Worksheet

What is your net worth?

The way we manage our income and our outgo influences the amount of our net worth.  If we spend less than we earn we can grow our net worth every year. Here are some questions to help you think about how you are doing financially.

To calculate the amount of your net worth, answer the following questions.

• What is the value of the things your own?
  • What are the things that you own?
  • Write the current fair market dollar value of the things that you own.
  • Total the value of the things you own.
• What are your debts?
  • Write the amount that you owe for each debt.
  • Total the amount of debt you owe.
• Total the value of your assets and total the amount of your debts.
• Subtract the total amount you owe from the value of what you own.  The difference is your net worth.

Are you happy with the results you see?

• Take a look at your cash flow statement.
• Are you happy with the results you see?
• ŸAre there changes you want to make in where you are spending your money.
• ŸWrite down the dollar amount changes you want to make   Commit to taking the action to make the changes.
• Taking a look at our cash flow is a way to see what we are doing with our money.  If we don’t like what we see, we can take actions to move toward having enough money to do the things we want to do.
• Review your cash flow statement regularly to see where you can increase income or decrease expenses to have enough money to meet your financial needs.
• When you spend less than you earn, you can use the money to grow your net worth.
• Calculate your net worth.  Review your balance annually to assess your financial situation.  Identify ways you can increase your assets and decrease your debts to continually build the value of your net worth.