Myles of Investments

Read about my successes and failures. Learn from my experiences and gain insight without losing any cash!!!

Lesson: Catching a Falling Knife
Lesson: Currency Exchange
Lesson: Mutual Fund
Lesson: Paid to Wait
Lesson: Pricing in a Downturn

This is where you’ll find find my Blog. I will comment on the latest news relating to investing, real estate, and the financial markets.

Cashflow Sheet: Your Scorecard

The combination of an income statement and a balance sheet is your real time scorecard for your wealth. This is the most critical management tool you will use on a monthly basis to track your wealth and situation. All values should be calculated over a month, for example, if you pay the electricity bill every two months, divide it in half to get the cost for one month.

To create a cashflow sheet, begin by placing all income you receive in the top left quadrant, this is your paycheck or pension, as well as any investment income, such as dividends. In the op right quadrant of your cashflow sheet, you will put all assets, such as the current market value of your house, or the value of bonds and stocks that you hold. The bottom left quadrant of your cashflow sheet will be for expenses that you must pay each month, (this will likely be the largest column). It is important to put everything that you spend, in this column, such as hydro, gas, television and phone bills, your rent or mortgage payment, car payments, payments to credit cards etc., etc. The bottom right corner of your cashflow sheet should list all of your liabilities, such as the value of your mortgage, personal lines of credit, car loans, student debt, total of credit cards etc.

You will calculate two values with your cashflow sheet:

1) Subtract expenses from your income (top left total – bottom left total), this value is your wealth. If the number is negative you are digging a hole and going into debt, if it’s even you balance out, and if it is positive, your bank account will be growing! To calculate your wealth, remove the income you earn from your daily job and count only your passive income. This is income that is generated without you physically working, for example interest on investments, dividends, or rental income. The closer this total gets to zero, from negative, the closer you are to being wealthy, if you are positive – congratulations, you’ve done it!

2) The second calculation is to subtract your asset total (top right) from your liability total (bottom right). This is your net worth. This tells you how much money you would have in your pocket if you decided to sell everything you own, and pay back all of your debts. See section on details of cashflow for more explanation. [link to page]

The cashflow sheet is an important gauge on your road to wealth. Make sure to recalculate each time any of the numbers in any of the quadrants changes. This way you’ll always know your score!