Am I Going to Make It?

There are three tools for evaluating your financial health - the balance sheet, the income statement and the cash flow statement.

The balance sheet is a snapshot of your finances on a given date. It simply lists all of your assets (stuff you own along with cash and investments), your liabilities (what you owe) and your net worth (the difference between these two - hopefully it will be a positive number).

The income statement is a broader picture of your finances over a period of time, say a year. It shows the income you have generated for the period and the expenses you have incurred (and if all goes well, you will have money left over).

While the balance sheet and income statement give you a sense of where you have been, the cash flow statement gives you a current picture of what income you expect to receive and what expenses you will have to pay. Whereas the budget is a projection of these items, the cash flow statement shows you what is actually going on. As you look over your cash flow statement you can better plan how to use your resources effectively.