Here are 3 powerful financial concepts that will help you smartly think of your money, and make better financial decisions.
<aside> 😊 These are fairly technical but essential concepts to understand to use Nova effectively. Don’t hesitate to ask clarifying questions to our Finance team through the live chat.
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Think of cash flows as the money coming in and going out during the month. They include your income (like salary or side hustle earnings) and your expenses (like rent, groceries, or fun nights out).
In Nova, you'll see your past and forecasted cash flows in Analytics Cash Flows so you can gain clear visibility on your future.
Your balance sheet is like a snapshot of your assets and liabilities.
Example
Alice has a total cash balance of £10k, has invested £10k in a Stocks & Share ISA, has accumulated £80k worth of investment in her pension fund and she recently bought a £400k.
She still carries a £20k student loan and signed a £350k mortgage when buying her house.
Here is her balance sheet:
| Assets | Amount | Liabilities | Amount | |
|---|---|---|---|---|
| Cash | £10,000 | Student loan | £20,000 | |
| Stocks | £10,000 | Credit card debt | £0 | |
| Pension funds | £80.000 | Overdraft | £0 | |
| Real estate | £400,000 | Mortgage | £350,000 | |
| Other investments | £0 | |||
| Total assets | £500,000 | Total liabilities | £370,000 |
In the corporate world, companies analyse their balance every month, quarter or year depending on their sophistication. Banks also forecast their balance sheet to validate the decision they’re making.
Although Nova Money doesn’t report your balance sheet (let us know if that’s a feature you want), it’s an important concept to grasp.