Wednesday, December 03, 2008

Porfolio Structuring Step 2: Understand Cash Flows

The second step is to understand your cash flows. If you are a salaried employee, that is fairly easy. Just look at the monthly take home pay you get. Also, look at the expenses you incur. While looking at your expenses, add things like your insurance premiums, vacationing expenses, eating out, gifts that you need to buy etc.
Basically, add anything that you spend money on during the year. Now, make it into a monthly estimate. For example,

Monthly Take Home Salary == 30,000

Annual Expenses (all inclusive) == 240,000
then, Monthly Expenses == 20,000

Then you have a disposable income of 1,000 every month after meeting all your expenses. That is the total money you have for investment.

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