Cash Flow Audit & Net Worth Tracking
Managing personal finances begins with measuring where you stand today through two financial statements: the Cash Flow Statement and the Net Worth Statement.
1. Cash Flow Statement (Income vs Outflow)
Track monthly inflow against three core buckets:
- Fixed Commitments: Rent, EMIs, utilities, groceries, insurance premiums
- Investing & Savings Target: SIPs, emergency fund reserve (aim for 20-30%+ of income)
- Discretionary Outflow: Dining out, travel, entertainment
2. Net Worth Calculation
Net Worth = Total Assets - Total Liabilities
- Assets: Bank balances, mutual funds, provident funds, gold, real estate market value.
- Liabilities: Home loans, personal loans, credit card balances, car loans.
Annual Health Check Rules
- Aim for positive and growing net worth year-over-year.
- Maintain a debt-to-income ratio below 40% (total EMIs should not exceed 40% of net monthly income).