Cash(Flow) rules everything around me

Nickels, would you believe there was a time I did not understand how to save to reach my financial goals? I graduated in 2009 with a degree in Finance and had close to nothing in my savings account. Of course my lack of financial resources were partly due to my student loans and the challenges I faced during the recession with securing employment. The other part of my issue was attributed to the fact that I had never really been taught the importance of saving. As I have mentioned before in this blog, I grew up modestly in a low income household being raised by a single mother of 3. Learning to save or having the means to save was not our reality and therefore, it was not a skillset taught in our household. Additionally, college did not really prepare me in this area. I am guessing subjects like saving and budgeting were too rudimentary for a college curriculum. My true lessons about saving were learned in the real world. My good friend who I met at my first corporate job taught me the fundamentals of saving 12 years ago and it changed my life forever. I now want to impart some that knowledge and knowledge I have accrued over years on to you.

Learning to save (as an adult) 101 means first understanding how to create a cashflow statement. A cash flow statement is a record of your inflows (credit) and outflows(debit) transactions. It is used to determine your spending habits and patterns. Also, this statement can be used to make a budget and calculate your emergency fund needs. Below are some things you should keep in mind when preparing your cashflow statement.

1. Prepare your cash flow statement for a specific period of time such as a monthly, quarterly, or annual basis. Select a frequency that best works for you so that you can commit to tracking it. In the beginning it may be prudent to monitor your cash flow on a monthly basis to get an idea of your spending habits and to modify your behavior as needed to achieve a surplus.
2. Be precise and honest when inputing your data. I know it is easy to guess but the accuracy and effectiveness of the calculations that are supported by the cashflow statement are contingent on correct data. Try not to be tempted to manipulate your figures. If you notice you are in a deficit after completing your statement you can follow up by creating a pro forma cash flow statement. A pro forma statement is used during financial planning process to help clients see their projected inflows and outflows following the implementation of a plan. Theoretically, this version of a cash flow statement should have a surplus or break even. It works like a budget.
3. Prepare the cashflow statement at the end of a period. This allows you the ability to reflect on what you’ve actually earned and spent during a particular period. Also, it allows you the ability to reference official documents like paid invoices, bank statements, credit card statements, and paystubs.
4. Itemize your statement. This is where you want to be as detailed as possible to ensure you have recorded every expense incurred by category and income received during a specific period. This is important because it will help you address specific areas of opportunity to create a realistic budget and emergency fund at a later time. Traditionally the categories are distinguished by fixed and variable outflows which is an another benefit that will help you create a budget down the line.
5. Having a surplus means you have money you can invest.