Power Takeaways and Checklist

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We have reached the finale of our Budget Planning series. With a clearer vision and budgeting, you should now strive for a healthier cash flow.

In conclusion:
A cash flow statement shows you where your money is coming from and where it is going over a period of time.

A budget is simply a tool to help you manage and track your cash flow more effectively.

A budget is the best tool to ensure you spend and live within your means.
Having savings is very important as it will help with emergencies.

A net worth statement gives you a snapshot of your financial position at any given time and serves as a tool to help you track your progress.

Self-Assessment:

  1. Which of the following are the main components of cash flow management?
    a. Income and expenses
    b. Assets and liabilities
    c. Debtors and creditors
    d. Profit and loss account and balance sheet
  2. A budget helps you to
    a. live within your means
    b. achieve financial goals
    c. set aside money for savings
    d. all of the above
  3. Why is savings important?
    a. To plan for your retirement
    b. To prepare for emergencies
    c. Down payment to buy your first house/car
    d. All of the above
  4. How many months of living expenses are recommended for your emergency fund?
    a. One to two months
    b. Three to six months
    c. Eight to nine months
    d. 12 to 24 months
  5. What is your net worth?
    a. My total liabilities plus total assets
    b. My total income plus total expenses
    c. My total assets minus total liabilities
    d. My total income minus total expenses
  6. What is the minimum monthly recommended percentage of your income to be set aside as savings (apart from EPF contribution)?
    a. As and when you have it
    b. At least 50% each month
    c. At least 10% each month
    d. None of the above
  7. What is a good financial habit?
    a. Having monthly repayments of more than 40% of your net monthly income
    b. Tracking your expenses and cash flow c. Living lavishly
    d. Paying the minimum amount on your credit cards