The Cash Flow Statement is the one document that you can create which will definitively show whether you can expect your wealth to increase or decrease in the long run.
There are only three variables we can manipulate in any financial plan that will affect long-term wealth:
- The amount of inflows
- The amount of outflows
- The rate of return on savings/investments
Two of these variables are reflected on the Cash Flow Statement and that’s what makes it a powerful tool if it’s constructed properly.
In today’s show we discuss the nuts and bolts of creating a Statement of Cash Flows. This information will be useful to you if you’re working on your own financial plan or if you’re a planner serving clients.
If you haven’t listened to it yet, I suggest you listen to Episode 22: An Introduction to the Statement of Financial Condition before listening to this show.
Here is a link to a sample spreadsheet I created to guide you in preparing your own.