Month after month, many individuals look at their bank and credit card statements and are surprised that they spent more than they thought they did. To avoid this problem, one simple method of accounting for income and expenditures is to have personal financial statements. Just like the ones used by corporations, financial statements provide you with an indication of your financial condition and can help with budget planning. (Investopedia)

The two types of financial statements:

A personal cash flow statement measures your cash inflows and outflows in order to show you your net cash flow for a specific period of time. Cash inflows generally include the following: Salaries. Interest from savings accounts.

A personal balance sheetet worth statement provides an overall snapshot of your wealth at a specific period in time. It is a summary of your assets (what you own), your liabilities (what you owe), and your net worth (assets minus liabilities).

Because this information is highly personal and very private, you may either decide to submit these two documents (Cash Flow and Net Worth Statements) with your true financial situation or use data from the case study, Managing a Budget, attached here, or simply make up the data based on your whims or desires or beliefs of what your financial situation should be. Either way, it is in your best long-term financial interests to have your true net worth statement and cash flow statement on-hand and up-to-date, especially the cash flow statement.

Note:

You need to explain most of the items in your Cash Flow statement and Net Worth Statement. Explain how you derived the numbers. For instance, if you include two line items for income,explain where they're coming from in the Notes column.

MANAGING A BUDGET Jamie Lee Jackson, age 24. now a busy full-time college student and part-time bakery clerk, has been trying to organize all of her priorities, including her budget. She has been wondering if she is allocating enough of her income toward savings, which includes accumulating enough money toward the $9,000 down payment she needs to open her dream cupcake caf. Jamie Lee has been making regular deposits to both her regular and her emergency savings accounts. She would really like to sit down and get a clearer picture of how much she is spending on various expenses, including rent, utilities, and entertainment, and how her debt compares to her savings and assets. She realizes that she must stay on track and keep a detailed budget if she is to realize her dream of being self-employed after college graduation. Current Financial Situation . Assets: Checking account: $1,250 Emergency fund savings account: $3,100 Car: $4,000 Liabilities: Student loan: $5,400 Credit card balance: $400 Income: Gross monthly salary: $2,125 Net monthly salary: $1,560 Monthly Expenses: Rent obligation: $275 Utilities obligation: $125 Food: $120 Gas/Maintenance: $100 Credit card payment: $50 Page 69 Savings: Regular savings: $150 Emergency savings: $25 Entertainment: Cake decorating class: $35 Movies with friends: $50 Questions 1. According to the text, a personal balance sheet is a statement of your net worth. It is an accounting of what you own as well as what you owe. Using the information provided, prepare a cash flow statement and a personal balance sheet (net worth statement) for Jamie Lee. MANAGING A BUDGET Jamie Lee Jackson, age 24. now a busy full-time college student and part-time bakery clerk, has been trying to organize all of her priorities, including her budget. She has been wondering if she is allocating enough of her income toward savings, which includes accumulating enough money toward the $9,000 down payment she needs to open her dream cupcake caf. Jamie Lee has been making regular deposits to both her regular and her emergency savings accounts. She would really like to sit down and get a clearer picture of how much she is spending on various expenses, including rent, utilities, and entertainment, and how her debt compares to her savings and assets. She realizes that she must stay on track and keep a detailed budget if she is to realize her dream of being self-employed after college graduation. Current Financial Situation . Assets: Checking account: $1,250 Emergency fund savings account: $3,100 Car: $4,000 Liabilities: Student loan: $5,400 Credit card balance: $400 Income: Gross monthly salary: $2,125 Net monthly salary: $1,560 Monthly Expenses: Rent obligation: $275 Utilities obligation: $125 Food: $120 Gas/Maintenance: $100 Credit card payment: $50 Page 69 Savings: Regular savings: $150 Emergency savings: $25 Entertainment: Cake decorating class: $35 Movies with friends: $50 Questions 1. According to the text, a personal balance sheet is a statement of your net worth. It is an accounting of what you own as well as what you owe. Using the information provided, prepare a cash flow statement and a personal balance sheet (net worth statement) for Jamie Lee