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Personal Financial Statement: Definition, Uses, and Example

What Is a Personal Financial Statement?

The term personal financial statement refers to a document or spreadsheet that outlines an individual's financial position at a given point in time. The statement typically includes general information about the individual, such as name and address, along with a breakdown of total assets and liabilities . The statement can help individuals track their financial goals and wealth, and can be used when they apply for credit .

Key Takeaways

• A personal financial statement lists all assets and liabilities of an individual or couple.
• An individual's net worth is determined by subtracting their liabilities from their assets—a positive net worth shows more assets than liabilities.
• Net worth can fluctuate over time as the values of assets and liabilities change.
• Personal financial statements are helpful for tracking wealth and goals, as well as applying for credit.
• Although they may be included in a personal financial statement, income and expenses are generally placed on a separate sheet called the income statement.

Understanding the Personal Financial Statement

Financial statements can be prepared for either companies or individuals. An individual’s financial statement is referred to as a personal financial statement and is a simpler version of corporate statements . Both are tools that can show the financial health of the subject.

A personal financial statement shows the individual's net worth —their assets minus their liabilities—which reflects what that person has in cash if they sell all their assets and pay off all their debts. If their liabilities are greater than their assets, the financial statement indicates a negative net worth. If the individual has more assets than liabilities, they end up with a positive net worth.

Keeping an updated personal financial statement allows an individual to track how their financial health improves or deteriorates over time. These can be invaluable tools when consumers want to change their financial situation or apply for credit such as a loan or a mortgage . Knowing where they stand financially allows consumers to avoid unnecessary inquiries on their credit reports and the hassles of declined credit applications.

The statement allows also credit officers to easily gain perspective into the applicant's financial situation in order to make an informed credit decision. In many cases, the individual or couple may be asked to provide a personal guarantee for part of the loan or they may be required to put up collateral to secure the loan.

Special Considerations

A personal financial statement is broken down into assets and liabilities. Assets include the value of securities and funds held in checking or savings accounts , retirement account balances, trading accounts , and real estate. Liabilities include any debts the individual may have including personal loans, credit cards, student loans, unpaid taxes , and mortgages. Debts that are jointly owned are also included. Married couples may create joint personal financial statements by combining their assets and liabilities.

Income and expenses are also included if the statement is used to attain credit or to show someone's overall financial position. This can be tracked on a separate sheet or an addendum, called the income statement . This includes all forms of income and expenses—typically expressed in the form of monthly or yearly amounts.

The following items are not included in a personal financial statement:

• Business-related assets and liabilities: These are excluded unless the individual is directly and personally responsible. So if someone personally guarantees a loan for their business—similar to cosigning —the loan is included in their personal financial statement.
• Rented items: Anything rented is not included in personal financial statements because the assets aren't owned. This changes if you own the property and rent it out to someone else. In this case, the value of the property is included in your asset list.
• Personal property: Items such as furniture and household goods are typically not included as assets on a personal balance sheet because these items can’t easily be sold to pay off a loan. Personal property with significant value, such as jewelry and antiques, may be included if their value can be verified with an appraisal .

Business liabilities are only included in a personal financial statement if an individual provides the creditor with a personal guarantee.

Keep in mind. Your credit report and credit history are big considerations when it comes to getting new credit and every lender has different requirements for issuing credit. So, even if you have a positive net worth—more assets than liabilities—you may still be refused a loan or credit card if you haven't paid your previous debts on time or have too many inquiries on file.

Example of a Personal Financial Statement

Let's assume that River wants to track their net worth as they move toward retirement . They have been paying off debts, saving money, investing , and are getting closer to owning their home. Each year, they update the statement to see the progress they have made.

Here's how they would break it down. They would list all their assets—$20,000 for a car, $200,000 for their house, $300,000 in investments, and $50,000 in cash and equivalents . They also own some highly collectible stamps and art valued at $20,000 that they can list. Their total assets are, therefore, $590,000. As for liabilities, River owes $5,000 on the car and $50,000 for their house. Although River makes all of their purchases with a credit card, they pay the balance off each month and never carry a balance. River cosigned a loan for their daughter and $10,000 remains on that. Even though it is not River's loan, they are still responsible, so it is included in the statement. River's liabilities are $65,000.

When we subtract their liabilities from their assets, River's net worth is $525,000. Although they use it mainly to track their financial health, River can use this information—and the statement as a whole—if they want to apply for any other credit.

Small Business Administration. “ Personal Financial Statement .” Pages 2-3.

Experian. “ What Happens If Your Loan Is Denied? ”

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How To Create A Personal Financial Statement (With Template)

Michael jerkins, md med.

When applying for credit or a loan, many lenders will ask to review your personal financial statement. If you’ve never created one before, it can seem intimidating, but the process is fairly simple. Here are a few tips for creating your personal financial statement (and a template) to help you get started.

What is a personal financial statement?

A personal financial statement (PFS) is a document that outlines your financial position at a specific point in time. It identifies assets and liabilities to find net worth and provides a clear picture of your financial health. A PFS can help you make informed decisions about spending, saving, investing, and planning for the future.

A PFS is most often needed when applying for business loans or mortgages but may be required for other types of credit, like personal loans . Lenders will assess a loan applicant’s PFS to determine financial health and lending eligibility.

4 steps to creating your personal financial statement

1. gather necessary information.

Start by compiling all relevant financial information, including bank statements, investment portfolios, real estate holdings, and outstanding debts. This can be done with paper copies of statements or through digital account access.

2. Calculate your assets

Assets are everything you own that has value. Common categories include: cash and cash equivalents, investments, real estate, and personal property (such as jewelry, art, furniture, vehicles, boats, collectibles, etc.).

Asset categories

• Liquid assets
• Cash in bank accounts
• Publicly traded investments

Non-current assets

• Retirement accounts
• Real estate
• Other real estate market value
• Other assets

3. Calculate your liabilities

Liabilities are your financial obligations. Common categories include: mortgages, credit card debt, student loans, and other debt.

Liability categories

• Total revolving credit (i.e. credit cards)
• Total student and installment loans such as personal loans
• Mortgage on personal residence
• Mortgage(s) on other real estate
• Other liabilities

4. Determine your net worth

Subtract your total liabilities from your total assets to determine your net worth. This figure provides a clear picture of your financial standing and serves as a benchmark for measuring financial progress over time.

Assets – Liabilities = Net Worth

Personal financial statement template

Are you ready to create your PFS? Whether applying for a loan or wanting to know where you are financially, this simple-to-use template can make the process of gathering your financial information and calculating your net worth a little easier. Click here to download the free personal financial statement template .

Tips for maintaining & using your personal financial statement

Make regular updates: Make it a habit to update your PFS regularly, ideally on a quarterly basis, to reflect any changes in your financial situation.

Review and analyze changes: Take the time to review and analyze any fluctuations in your assets, liabilities, and net worth. This will help you identify trends, spot areas for improvement, and adjust your financial strategy accordingly.

Set financial goals: Use your PFS as a roadmap for setting and prioritizing your financial goals. Whether it’s saving for retirement , paying off debt, or buying a home , align your goals with your current financial reality.

Common mistakes to avoid

Incorrectly estimating assets: Be conservative yet realistic when valuing your assets to avoid skewing your net worth calculation.

Neglecting certain debts: Don’t overlook any outstanding debts, no matter how small they may seem. Even minor debts can impact your overall financial health.

Using your personal financial statement

Your PFS is more than just a document—it’s a powerful tool for assessing your financial health, making informed decisions, and tracking your progress toward your financial goals. Refer to it regularly to stay on course and make adjustments as needed.

If you are preparing your PFS as you head toward practice ownership, Panacea Financial can help you be fully prepared for this next step in your career. Find other tips and information you should know as you take the next step in your career in our free “ A Dentist’s Guide to Acquiring a Practice .” Download it here.

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Home > Finance > Personal Financial Statement: Definition, Uses, And Example

Personal Financial Statement: Definition, Uses, And Example

Published: January 7, 2024

Learn about the definition, uses, and example of a personal financial statement in the world of finance. Understand its importance and impact on your financial planning.

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Understanding Personal Financial Statements

When it comes to managing your finances, having a clear understanding of your financial position is essential. This is where personal financial statements come into play. In this article, we’ll explore the definition, uses, and provide an example of a personal financial statement.

Key Takeaways:

• Personal financial statements provide a snapshot of an individual’s financial position.
• These statements are useful for assessing one’s net worth, cash flow, and financial health.

A personal financial statement is a document that summarizes an individual’s financial situation, including their assets, liabilities, income, and expenses. It provides a comprehensive overview of one’s financial health and can be an invaluable tool for making informed financial decisions.

Let’s delve deeper into the various components of a personal financial statement:

Assets refer to items of financial value that an individual owns. This can include cash, savings accounts, investments, real estate, vehicles, and personal belongings. In the personal financial statement, these assets are listed at their current market value. By calculating the total value of assets, one can determine their net worth.

Liabilities

Liabilities encompass the debts and obligations that an individual owes. This can include credit card debt, mortgages, student loans, car loans, and any other outstanding debts. Similar to assets, liabilities are also listed in the personal financial statement, giving a clear picture of one’s overall financial obligations.

Income and Expenses

The personal financial statement also includes an individual’s income and expenses. Income refers to all sources of money inflow, such as salary, rental income, investments, or any other forms of income. Expenses, on the other hand, encompass all the money outflows, including rent/mortgage payments, utilities, groceries, transportation costs, and other personal expenses. By analyzing this section, one can assess their cash flow and determine if they are living within their means.

Uses of Personal Financial Statements:

• Assessing net worth: By calculating the total value of assets and subtracting liabilities, one can determine their net worth.
• Evaluating financial health: Personal financial statements provide a holistic view of an individual’s financial health, helping identify areas for improvement.
• Applying for loans: Lenders often require personal financial statements when assessing an individual’s creditworthiness.
• Planning for the future: These statements serve as a foundation for setting financial goals and creating a budget.

Example of a personal financial statement:

Let’s take a look at a simple example of a personal financial statement:

Personal Financial Statement of John Doe

• Cash: $10,000
• Savings Account: $20,000
• Investments: $50,000
• Real Estate: $150,000
• Total Assets: $230,000
• Mortgage: $100,000
• Student Loans: $20,000
• Credit Card Debt: $5,000
• Total Liabilities: $125,000
• Salary: $60,000
• Rental Income: $12,000
• Total Income: $72,000
• Monthly Rent/Mortgage: $1,500
• Utilities: $200
• Groceries: $400
• Transportation: $300
• Total Expenses: $2,400

In this example, John Doe’s net worth is calculated by subtracting his liabilities ($125,000) from his assets ($230,000), resulting in a net worth of $105,000. His monthly cash flow can also be determined by subtracting expenses ($2,400) from income ($6,000), resulting in a positive cash flow of $3,600.

Personal financial statements are crucial for managing your finances effectively. By regularly updating and analyzing your personal financial statement, you can gain valuable insights into your financial standing and make informed decisions to achieve your financial goals. Whether you’re applying for a loan, evaluating your financial health, or simply aiming to improve your financial well-being, personal financial statements are an essential tool in your financial toolkit.

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Understanding Personal Financial Statements: A Comprehensive Guide

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Financial literacy isn’t just a skill; it’s a necessity in our complex modern economy. Our financial landscape is filled with many challenges—from managing debt and investments to planning for retirement. A personal financial statement is one key financial document that makes navigating these challenges easy.

Personal financial statements, which comprise a balance sheet and cash flow statement, provide a snapshot of your financial health, allowing you to evaluate your current financial condition, track changes over time, and plan for the future. Imagine seeing, at a glance, areas where you can reduce spending, if your net worth is increasing or decreasing, or if you are on track to meet your financial goals.

That’s the kind of clarity these statements provide. They don’t just contain numbers; they provide insights into your financial health, facilitating better decisions and effective long-term planning. For example, a cash flow statement can reveal if you are spending too much on non-essential items, while a balance sheet can show if your debt is becoming unmanageable.

Additionally, analyzing these statements together provides a broad view of your financial situation, helping you identify potential issues before they become significant problems. For instance, if your cash flow statement shows a consistent surplus, but your balance sheet reveals increasing debt, that might be a sign that you are not using your surplus efficiently to pay down debt.

In this guide, we’ll walk you through the two common types of personal financial statements: the personal balance sheet and the personal cash flow statement. We’ll explain each statement, their typical line items, the benefits of creating them, and their limitations.

Finally, we’ll share some pro tips on creating and maintaining each statement, and we’ll examine two case studies that illustrate how each statement can help individuals make better financial choices. At the end of the guide, you will be able to download a free template to get you started on monitoring your finances.

Let’s dive right in.

In a hurry and can’t read this guide in one go? Download the free PDF version to read whenever you have the chance!

Download Link:  Understanding Personal Financial Statements: A Comprehensive Guide

A personal balance sheet provides a snapshot of your financial position at a specific period, typically a month or a year. It outlines what you own (assets), what you owe (liabilities), and the difference between the two, known as your net worth. Assets include your house, car, investments, and savings, while liabilities encompass debts such as your mortgage, car loan, and credit card balances.

For instance, say your assets include a $350,000 house, a $30,000 car, $80,000 in investments, $30,000 in savings, and $10,000 in other assets, totaling $500,000. On the other hand, your liabilities include a $150,000 mortgage, $20,000 car loan, $10,000 credit card debt, $15,000 student loan, and $5,000 in other debts totaling $200,000. In this scenario, your net worth would be $500,000 (Total Assets) – $200,000 (Total Liabilities) = $300,000.

Understanding, creating, and maintaining a personal balance sheet helps you make informed decisions about investments, loans, and other financial matters. For example, by knowing your net worth, you can determine how much debt you can afford for a new home or car, how much you can reasonably invest, or whether you need to focus on paying down existing debt.

A personal balance sheet consists of two major categories: assets and liabilities. You can further divide these categories into subcategories that outline what you own and owe. Let’s briefly examine the typical structure of a personal balance sheet.

“Assets” is the first section on a personal balance sheet, and it covers everything you own that has a monetary value. These include tangible items like your home, car, and personal belongings, as well as intangible items like investments and savings accounts. Essentially, anything you could sell or cash in for money is considered an asset.

Assets are typically categorized into two groups: liquid and non-liquid assets. Let’s briefly examine the types of assets that fall under each group.

Liqui d Assets

“Liquid Assets” is the first category under the “Assets” section. It includes all assets that can be quickly and easily converted into cash without losing much value. Such assets include the following: 

• Cash and Cash Equivalents: This subcategory accounts for physical cash, checking accounts, savings accounts, certificates of deposit, and money market accounts, which are investments easily convertible to cash, making them as liquid as cash.
• Liquid Investments: This subcategory covers stocks, bonds, mutual funds, exchange-traded funds, and other liquid investment assets. You can convert these assets to cash relatively quickly without losing much value.

Non-Liq uid Assets

“Non-Liquid Assets” is the second category under the “Assets” section. This subcategory covers all assets that cannot be easily converted into cash or would lose value in the process. Such assets include the following:

• Retirement Accounts: This subcategory includes all forms of retirement funds you have. While the assets within a retirement account (like a 401(k) or an IRA) may be liquid, there are often penalties and tax consequences for withdrawing funds before a certain age. This is why it is usually classified as a non-liquid asset.
• Real Estate: This subcategory covers the market value of your home, rental properties, or any other real estate properties you own.
• Personal Property:   This subcategory includes the value of tangible assets such as cars, jewelry, furniture, electronics, collectibles, and other personal belongings. Note that these items should be valued at what they could be sold for now, not what was initially paid for them, as the value of many items depreciates over time, and overvaluing your assets can result in an inflated net worth. 
• Business Ownership: If you own a business, the value of your ownership stake is an asset and should be recorded under this subcategory.
• Other Assets: This subcategory accounts for any other assets not included in the preceding subcategories, such as loans you have given to others, tax refunds expected, etc.

Liabilities

“Liabilities” is the second section on your personal balance sheet, and it represents all debts and financial obligations. These can include various forms of debt, such as mortgages, car loans, credit card balances, and personal loans. Essentially, anything you need to pay back to others, whether to a bank, a credit card company, or a friend, is considered a liability.

Just as with assets, liabilities are also usually categorized into two groups: short-term and long-term liabilities. Let’s briefly examine the types of liabilities that fall under each group.

Shor t-Term Liabilities

“Short-Term Liabilities” is the first category under the “Liabilities” section. It includes all debts that are due within a year. Such liabilities include the following:

• Credit Card Balances: This subcategory highlights all you owe to credit card companies.
• Utility Bills: This subcategory covers all your utility bills, such as electricity, water, gas, and internet.
• Medical Bills: This subcategory includes any outstanding bills you owe for medical services or treatments. This can include doctor’s visits, hospital stays, and prescription medications. 
• Personal Loans: This subcategory accounts for any loan you take out for personal reasons, such as to cover unexpected expenses or to consolidate debt, and are due within a year.
• Payday Loans: This subcategory covers all short-term loans typically due on your next payday. 
• Overdrafts: This subcategory highlights the amount by which withdrawals from your bank account exceed the available balance.
• Taxes Due: This subcategory includes everything you owe to the government in taxes. This can include income, property, and any other taxes due within a year.
• Other Short-Term Liabilities: This subcategory accounts for every other bill or money you owe and is due within a year, such as insurance premiums, subscription services, gym memberships, and contingent liabilities, which are potential liabilities that depend on a future event.

Long-Term Liabil ities

“Long-Term Liabilities” is the second category under the “Liabilities” section. It includes all debts that are due in more than a year. Such liabilities include the following:

• Mortgage: This subcategory covers every mortgage you’ve taken on your home. It is typically the most significant liability for most people and is paid off over many years, often 15 to 30 years.
• Auto Loan: This subcategory includes any car loans you’ve taken out. These loans are typically paid off over a period of 3 to 7 years.
• Student Loans: This subcategory highlights any student loans you’ve taken out, which typically have a 10- to 30-year repayment period.
• Personal Loans: This subcategory accounts for any loan you take out for personal reasons, such as to cover unexpected expenses or to consolidate debt, and are due after a year.
• Pension Liabilities: This subcategory spotlights the amount you owe to your pension plan if you have borrowed against it.
• Long-Term Lease Obligations: This subcategory includes the amount you owe on any long-term lease, such as a car or equipment lease.
• Other Long-Term Liabilities: This subcategory covers any other long-term obligations that do not fit the preceding categories, such as a lawsuit settlement being paid off over time.

“Net Worth” is the final figure on a personal balance sheet. This figure is a clear indicator of your financial health, and you can calculate it using the following formula:

• Net Worth = Total Assets – Total Liabilities

For instance, let’s assume you own a house valued at $350,000, have a car worth $20,000, a retirement account with $50,000, and a savings account with $10,000, putting your total assets at $430,000. Let’s further assume you have a mortgage balance of $200,000 and a car loan of $15,000, putting your total liabilities at $215,000. In this scenario, your net worth would be:

• Net Worth = $430,000 (Total Assets) – $215,000 (Total Liabilities) = $215,000

This positive net worth of $215,000 implies that you own more than you owe, which is the ideal financial position to be in. Suppose your liabilities had exceeded your assets in the preceding scenario. In that case, you’d have a negative net worth, meaning you owe more than you own. 

Your net worth is a crucial measure of your financial stability. A high positive net worth implies that you are in a strong financial position and have effectively managed your income, savings, investments, and debts. A negative net worth, on the other hand, signals the need to reevaluate your financial habits to reduce debts and increase assets to avoid financial insolvency.

Understanding your financial situation is crucial for making informed decisions about your future. A personal balance sheet is a valuable tool for gaining this understanding. Here are some key benefits of creating and maintaining this financial statement:

Increased Financial Awareness

Regularly creating and reviewing your balance sheet increases your awareness of your financial situation. This heightened awareness can lead to better financial decisions, such as avoiding unnecessary debt and expenses, making better investment choices, and being more disciplined with savings.

For instance, if you notice that a large portion of your income is spent on dining out and entertainment, this awareness could lead you to make more disciplined spending choices, such as cooking at home or choosing free entertainment options.

Moreover, understanding your financial situation can also lead to psychological benefits. For example, knowing that you have a manageable level of debt and a solid savings plan reduces financial anxiety and increases confidence in your ability to achieve your financial goals. Additionally, this awareness fosters a sense of control over your finances, encourages a more disciplined approach to spending and saving, and promotes a more positive and proactive outlook towards your financial future.

Snapshot of Financial Health

A balance sheet provides a quick, overall view of your financial health by showing your assets and liabilities at a glance, making it easier to identify financial strengths and weaknesses. For example, if your balance sheet reveals that your credit card debt is more than 50% of your total assets, it’s a clear sign that you need to focus on debt reduction. Ignoring this signal could lead to escalating debt, higher interest payments, and a lower credit score.

Conversely, if your balance sheet shows that your assets are three times greater than your liabilities, that implies positive financial strength. You could leverage this strength by investing in higher-yield assets or taking on manageable debt to invest in opportunities with a high return on investment.

However, it is crucial to approach this cautiously and consider the potential risks involved. Do thorough research or consult a financial advisor before making significant financial decisions.

Wealth Tracking

Creating and updating your personal balance sheet regularly helps you monitor your wealth over time. This ongoing tracking lets you see if you’re progressing toward your financial goals and pinpoint areas needing improvement.

For example, if you observe that the value of your stock portfolio has decreased significantly over the past year, this might indicate that your investment strategy needs to be reevaluated. Failing to take action could result in further losses, considerably reducing your overall wealth.

It’s important to factor in economic variables like inflation when assessing your financial growth. A nominal increase in wealth doesn’t always equate to an actual increase in financial well-being. For instance, a 3% increase in your wealth over the past year may seem positive, but if the inflation rate is 5%, your real wealth has actually decreased by 2%. It’s great to see your wealth grow year after year, but it’s essential to ask yourself: does the growth rate outpace or at least keep up with inflation?

Financial Planning

A personal balance sheet is an effective tool for planning financial goals. By knowing your net worth, you can devise better strategies for saving, investing, or debt repayment, helping you make informed decisions to achieve your financial goals. Let’s say you notice that your net worth is decreasing; it might be time to cut expenses, pay down debt, or reconsider large purchases or investments.

For example, if your net worth has decreased by 10% over the past year, you might decide to sell non-essential assets, reduce discretionary spending, or refinance your debt to lower interest rates. Doing a mix of the preceding will help you increase your net worth.

Additionally, a personal balance sheet can help you create a clear and detailed financial plan. For example, by knowing your net worth, you can set realistic savings and investment goals for the next year.

Remember, it is necessary to regularly revisit and adjust your financial plan and goals as your financial situation changes. Factors that may necessitate a change in your plan include a change in income, unexpected expenses, or changes in your financial goals. For example, if you receive a promotion and a salary increase, you may want to adjust your savings and investment goals accordingly. Similarly, if you incur unexpected medical expenses, you may need to adjust your budget and debt repayment plan .

Advanced Financial Analytics

Creating and maintaining a personal balance sheet makes it easier to calculate and track important personal financial ratios like the debt-to-asset ratio and capitalization ratio. These ratios are crucial for assessing your financial health and stability. For example, the debt-to-asset ratio helps you understand how much of your assets are financed by debt. In contrast, the capitalization ratio helps you understand your financial structure by showing the proportion of debt owed relative to equity owned.

While a personal balance sheet is an indispensable tool for understanding your financial health, planning your financial future, and making informed financial decisions, it’s also important to recognize its limitations. Knowing them helps you better interpret the information your balance sheet provides and understand what additional steps you may need to take to neutralize each limitation. Here are some key limitations of a personal balance sheet:

Doesn't Show Cash Flow

A balance sheet provides a snapshot of your financial situation at a specific point in time but doesn’t show cash flow. A cash flow statement provides a dynamic view of how money is earned and spent over a specific period. This can highlight issues not immediately apparent from the balance sheet, such as a negative cash flow despite a positive net worth. For example, someone might have a high net worth and still have cash flow problems because most of their assets are illiquid (e.g., real estate, long-term investments, etc.). Creating and maintaining a balance sheet and a cash flow statement is a great way to overcome this limitation.

Fluctuating Values

The values of assets and liabilities can fluctuate over time, making the balance sheet a snapshot accurate only at the moment it’s prepared. And this variability can significantly impact your financial planning and decision-making. For example, if you intend to sell some of your stocks, the value of those stocks when preparing the balance sheet may differ from the value at the time of the sale. This discrepancy could result in overestimating or underestimating the sale proceeds in your budget, each having distinct repercussions.

Consider a scenario where you plan to use the sale proceeds to repay debt. If the actual proceeds are lower than anticipated, you may find yourself unable to cover the debt fully, leading to additional interest charges or penalties. For this reason, it’s crucial to update your balance sheet frequently and exercise caution when making financial decisions based on it.

Subjective Asset Valuation

Some assets, like jewelry, art, or antiques, can be difficult to value accurately, making it challenging to create an accurate personal balance sheet. For instance, valuing a piece of art at $12,000 when it’s actually worth $5,000 will inflate your net worth and potentially mislead your financial planning. It’s advisable to consult a professional appraiser for items of significant value to mitigate this limitation.

Dependency on Accurate Data

The effectiveness of a balance sheet depends on the accuracy of the data inputted. Even minor errors in asset or liability values can lead to incorrect conclusions about your financial health. For example, an underestimation of debt by $1000 may seem inconsequential, but when interest is taken into account, the actual value of that debt could be significantly higher over time. This could lead to understating the time and money required to repay that debt.

Creating a personal balance sheet is crucial for anyone interested in managing their finances responsibly. However, the real benefit of a personal balance sheet lies not just in its creation but in regularly updating and using it wisely. Here are some pro tips to help you make the most of your personal balance sheet:

Start with Accurate Information

Gather all your financial documents, such as bank statements, mortgage statements, and credit card bills, before creating your balance sheet. Doing so will help ensure you don’t miss any assets or liabilities.

Categorize Your Assets and Liabilities

Break down your assets and liabilities into categories such as liquid assets (cash, savings), non-liquid assets (real estate, investments), short-term liabilities (credit card debt, other debts due within a year), and long-term liabilities (mortgage, student loans).

Consider Future Liabilities

Include expected future liabilities, such as a child’s college education, a planned home renovation, or future taxes, in your personal balance sheet. Doing so will help make your financial planning more accurate and effective.

For example, let’s say you’re planning for your child’s college education. You can estimate this future liability by researching the current tuition fees of the college your child might attend and its historical growth rate.

Suppose the current tuition fee is $30,000 per year, and historically, the tuition fee has increased by 5% annually. You can estimate that in 10 years, the tuition fee would be approximately $48,890 per year ($30,000 × (1 + 0.05)^10). This estimation will help you plan and save accordingly.

Use Conservative Values

Be conservative when estimating the value of your assets. This means using the lower end of an estimated value range and being cautious when including assets whose value is highly uncertain. Overestimating the value of your assets provides a false sense of financial security and leaves you unprepared for unexpected financial downturns.

Be Thorough

Being conservative matters a lot in creating an accurate personal statement, but so does being thorough. Ensure you include all your assets and liabilities, even if they seem insignificant. Small amounts can add up over time and may affect your financial health more than you realize. Assets and liabilities commonly overlooked include:

• Digital assets like cryptocurrency;
• Intellectual property (e.g., copyrighted material, patents);
• Collectibles (e.g., rare coins, stamps); and 
• Prepaid expenses (e.g., prepaid insurance, prepaid rent).

Liabilities: 

• Outstanding medical bills;
• Unpaid taxes;
• Personal loans from friends or family; and 
• Any accrued interest on existing loans.

Update Regularly

Update your balance sheet at least every quarter or when there is a significant change in your assets or liabilities, such as receiving an inheritance, buying a house, and paying off or incurring a debt. Recording changes in your assets and liabilities is the best way to spot trends you would have otherwise missed. Moreover, doing so helps make your balance sheet more accurate.

Review Past Balance Sheets

While you should update your personal balance sheet at least four times a year, it’s a good idea to monitor it regularly. Set a schedule for reviewing your personal balance sheet, such as monthly or quarterly. Regularly reviewing past balance sheets can help you identify trends, understand how your financial situation has changed, and make more informed decisions about the future.

Use Alongside A Cash Flow Statement

To better understand your financial health, use your personal balance sheet together with a personal cash flow statement. While the balance sheet provides a snapshot of your financial health at a specific point in time, the cash flow statement shows how you earned your money or spent it over a specific period. Using both financial statements will help you identify trends, gain more insights, and make more informed financial decisions.

Take Advantage of Tools and Templates

There are various tools and templates available online, such as Microsoft Excel templates, personal finance apps, or online budgeting tools that offer personal balance sheet templates. You can start with a basic template from Microsoft Excel and customize it to include categories specific to your financial situation, like adding a section for digital assets or future liabilities.

Reflect and Act

After creating your balance sheet, reflect on your financial situation. Are you meeting your financial goals? Do you need to adjust your spending or saving habits? Use your balance sheet as a tool for making informed financial decisions.

Seek Professional Help

If you are dealing with a complex financial situation, such as managing investments across multiple platforms, dealing with significant debt, or planning for retirement, it might be beneficial to seek advice from a certified financial planner or wealth manager. A financial planner can help you create a comprehensive financial plan, while a wealth manager can help you manage your investments and optimize for tax efficiency.

A personal cash flow statement tracks how much cash you’re earning and where it’s being spent over a specific period, typically a month or a year. This statement provides valuable insights into how you are managing your cash resources, enabling you to understand your spending patterns and make better financial decisions.

A personal cash flow statement records cash inflows and outflows during a specific period. Think of it as a story of your personal finances from a cash perspective, showing you where your money came from (inflows), where it went (outflows), and the net difference between the two. If your inflows exceed your outflows, then you’ll have a positive cash flow. Conversely, if your outflows exceed your inflows, then you’ll have a negative cash flow.

For example, let’s say your monthly cash inflows (salary, freelance work, etc.) are $5,000, and cash outflows (rent, utilities, groceries, etc.) amount to $3,200. In this scenario, your personal cash flow statement for that month would show a surplus of $1800, money you can put towards savings, investment, or other financial goals.

A personal cash flow statement typically consists of two main sections: cash inflows and cash outflows, which can be further divided into various categories and subcategories.

When creating a personal cash flow statement, it is essential to break down your cash inflows and outflows into different line items that track your income sources and expenditures. This detailed breakdown provides a clearer view of your financial situation, helping you identify potential areas for savings or producing additional income.

Let’s briefly examine the typical structure of a personal cash flow statement.

Cash Inflows

“Cash inflows” is the first section on a personal cash flow statement; it covers all the money that comes into your possession during a specific period, usually monthly or yearly. These inflows can include your salary, bonuses, dividends from investments, rental income, money received from selling assets, gifts, or any other sources of income. Essentially, any money you receive or earn is a cash inflow.

Cash Inflows are typically grouped into three categories: earned income, passive income, and other income. Let’s briefly examine the types of cash inflows that fall under each category.

Earned Income

“Earned Income” is the first category under the “Cash Inflows” category. It covers any money you earn by providing a service, working a job, or running a business. 

Common types of income under this category include the following:

• Salary/Wages: This line item covers your primary income source, typically earned through employment or self-employment. This is generally the largest portion of your income.
• Bonus/Commissions: This line item includes any additional income from your primary employment beyond your salary or wages.
• Business Income: If you have a side business or gig, such as freelance work or a small online business, include the gross income (i.e., income after business-related expenses are deducted) under this subcategory. For example, if you have a freelance business and earn $10,000 monthly but have $2,000 in business-related expenses (such as advertising, supplies, etc.), you would record $8,000 ($10,000 – $2,000) under this subcategory.

Passiv e Income

“Passive Income” is the second category under the “Cash Inflows” section, and it highlights any cash you earn without active, ongoing effort after the initial groundwork or setup. This category typically contains the following subcategories:

• Investment Income: This subcategory accounts for stock dividends, bond interest payments, rental property income, or any other income you earn from your investments. For example, if you own 100 shares in a company that pays $1 in dividends per share quarterly, you would receive $100 every quarter. This $100 would be recorded under this subcategory.
• Non-Investment Passive Income: This subcategory covers any income from passive ventures or endeavors where capital investment isn’t the primary driver, such as royalties from intellectual property and ad revenue from websites, blogs, or YouTube channels.

Oth er Income

“Other Income” is the third category under the “Cash Inflows” section, and it includes any other money you receive that doesn’t fall under the categories of earned or passive income. Typical subcategories under this category include the following:

• Asset Sales: If you’ve sold any assets like cars, furniture, investments, etc., the cash generated from these sales would be recorded under this subcategory. For example, if you sold a car for $10,000, this amount would be recorded under the “Sale of Assets” subcategory. Similarly, if you sold shares of stock for a total of $5,000, this amount would also be recorded here.
• Miscellaneous Income: This subcategory tracks all miscellaneous income sources like alimony, child support, social security income, lottery winnings, gifts, and inheritance. For example, if you received $500 as a reimbursement from your employer for work-related expenses, $200 as a refund from a returned purchase, and $50 as cashback from your credit card, you would record these amounts under this subcategory.

Cash Outflows

“Cash outflows” is the second section on a personal cash flow statement, and it represents all the money you spend during a specified period, typically monthly or yearly. These outflows include expenses such as rent or mortgage payments, utility bills, groceries, transportation costs, loan repayments, and entertainment. 

Essentially, any money you spend is a cash outflow, and unlike cash inflows, which increase your available funds, cash outflows reduce them. Let’s briefly examine the types of cash outflows that fall under this section.

Ess ential Expenses

“Essential Expenses” is the first category under the “Cash Outflows” section. It tracks all necessary costs you incur to maintain your basic standard of living. In other words, this category covers every cash you spend on needs rather than wants. Another way to think about essential expenses is that they are cash you need to spend to survive and function in society. Common types of expenses under this category include the following:

• Housing: This subcategory covers your mortgage or rent payments, maintenance, property tax, and renters’ insurance, among other housing-related costs. If you own a home, you will have property tax expenses; if you rent, you may have renters’ insurance. Accounting for these variations makes your cash outflows more accurate.
• Utilities: This subcategory accounts for basic services vital to everyday living, such as electricity, gas, water, sewer, trash, internet service, and phone bills.
• Food: This subcategory typically includes groceries and other essential food-related expenses, like school lunches for children or meals for elderly family members.
• Transportation: This subcategory highlights car payments, gas, insurance, maintenance, public transit, ride-share costs, vehicle registration, tolls, parking, and all other transportation-related expenses. 
• Healthcare: This subcategory covers health insurance premiums, out-of-pocket medical costs, prescriptions, alternative therapies, health supplements, and all other healthcare-related expenses. 
• Education: This subcategory includes tuition, textbooks, online courses, professional development, workshops, seminars, conferences, school supplies for kids, tutoring, educational software, and other education-related expenses. 
• Essential Personal Care: This subcategory includes clothing, personal grooming, dental care, cosmetics, skincare, and other personal care-related expenses. 
• Child Care/Support: This subcategory covers child care costs, school fees, child support payments, and other related expenses. 
• Insurance: This subcategory spotlights life insurance, disability insurance, and other insurance-related expenses. 
• Taxes Paid: This subcategory covers any additional tax payments you may make, such as estimated tax payments, that are not automatically deducted from your income. 
• Miscellaneous Essential Expenses: This subcategory covers essential expenses that don’t fit into the preceding subcategories. These include prescription glasses or contacts, special dietary needs, home safety equipment, professional licensing or certification fees, alimony payments, bank fees, etc.

Non-Essential Expenses

“Non-Essential Expenses” is the second category under the “Cash Outflows” section. All expenses that aren’t necessary for your survival or basic comfort but contribute to your lifestyle and happiness fall under this category. These expenses are typically optional and can be reduced or eliminated if necessary. Common types of non-essential expenses under this category include the following:

• Dining and Entertainment: This subcategory covers cash spent on meals, snacks, and beverages from restaurants, cafes, takeout, and delivery services.
• Luxuries: This subcategory includes any cash spent on things like jewelry, high-end electronics, designer clothing, etc.
• Non-Essential Personal Care: This subcategory accounts for expenses that are not necessary for maintaining basic health and hygiene. These expenses include spa and massage treatments, luxury cosmetics and skincare, tanning, etc.
• Leisure and Entertainment: This subcategory includes a wide range of expenses like gym memberships, subscriptions (like Netflix, Spotify, club memberships, etc.), hobbies, vacations, cultural events, theater, concerts, etc. 
• Miscellaneous Non-Essential Expenses: This subcategory accounts for all the expenses that are not crucial for your survival, basic comfort, or regular lifestyle but don’t fit into any existing non-essential expenses subcategories. These include gifts, donations, decor, special occasions, pet-related expenses, books, magazines, etc.

Non-Recurring Expenses

“Non-Recurring Expenses” is the third category under the “Cash Outflows” section. It accounts for essential or non-essential expenses that don’t occur regularly or predictably and don’t fit under preceding categories and subcategories. For example, acquisition of assets, legal fees, or any unexpected expenses like family emergencies. Common types of non-recurring expenses under this category include the following:

• Assets Acquisition: If you’ve bought assets like property, vehicles, or other large purchases, the cash used for these acquisitions would be recorded under this subcategory. 
• Property Loss: Expenses related to replacing lost or stolen property not covered by insurance, such as replacing stolen electronics, furniture, or other valuable items, can be recorded here.
• Family Emergencies: Expenses related to unexpected family emergencies, such as travel costs for a family member’s funeral or medical emergency, can be recorded here.

Debt Payments

“Debt Payments” is the fourth category under the “Cash Outflows” section. Any money used to repay the principal and interest on your debts is recorded under this category.

“Savings” is the fifth category under the “Cash Outflows” section. It tracks whatever income is set aside for future use, such as an emergency fund, retirement, or specific financial goals. Common line items under this category include goal-specific savings, emergency funds, retirement accounts, etc.

Investments

“Investments” is the sixth category under the “Cash Outflows” section. It covers any money used to purchase assets with the expectation that they will generate a return in the future. Line items commonly recorded under this category include stocks, bonds, mutual funds, real estate, start-up investments, etc.

Calculating your net cash flow is the final step in creating your personal cash flow statement. Net cash flow is the figure you get after subtracting your total cash outflows from your total cash inflows. It’s a vital indicator of your financial liquidity. You can calculate this figure using the following formula: 

• Net Cash Flow = Total Cash Inflows – Total Cash Outflows

To illustrate how to calculate net cash flow, let’s consider the following example. Assume your total cash inflows, which include your salary of $4,000, investment income of $500, and other income sources of $500, come to $5,000 per month. And your total cash outflows, encompassing costs such as housing ($1,500), food ($500), transportation ($400), personal expenses ($400), and debt repayments ($900), sum up to $3,700 per month. In this case, your net cash flow would be:

• Net Cash Flow = $5,000 (Inflows) – $3,700 (Outflows) = $1,300

Your net cash flow is $1,300 in this scenario, indicating a positive cash flow. This means you earn more than you spend, leaving you with excess cash that can be used for savings, investments, or reducing debt.

Interpreting your net cash flow involves understanding what the number means for your financial health. A positive net cash flow indicates a healthy financial situation where you live within your means and have leftover income to allocate towards savings, investments, or debt repayments. This is generally an ideal financial position to be in.

Conversely, if your net cash flow is negative, you spend more than you earn. A negative net cash flow could be due to one-time large expenses or indicate a pattern of overspending. If it’s the former, this may not pose a long-term issue, but if it’s the latter, you may need to reassess your budget and spending habits. Creating a detailed budget, tracking your expenses, and identifying areas where you can cut back or increase your income can help turn a negative net cash flow into a positive one.

To summarize, your net cash flow reveals whether you’re living within your means or overspending. It can serve as a wake-up call to adjust your spending habits or as a green light that you’re on track with your financial plans.

Creating a personal cash flow statement is more than just a financial exercise; it can help you develop a roadmap to your financial freedom. Whether you’re struggling with budgeting, debt, or planning for the future, a personal cash flow statement can provide invaluable insights. Here are some of the key benefits you unlock when you create a personal cash flow statement:

Regularly updating and reviewing your personal cash flow statement not only helps you keep tabs on your financial situation but also increases your awareness of your spending habits. For example, regularly reviewing your personal cash flow statement might help you notice that you’re consistently spending $100 monthly on takeout. Noting this pattern is the first step toward deciding whether this is an area where you can and should cut back.

Interestingly, as you regularly review your personal cash statement, you will become more conscious of your spending decisions in real time, not just when you review your statement.

Enhanced Budgeting

A personal cash flow statement can help you create a more detailed and practical budget by identifying exactly where your money is going. And with a comprehensive cash flow statement, you can easily spot areas where you may need to cut back on your expenses or allocate more funds.

For instance, let’s say you notice that your grocery bill has increased significantly over the last six months. You can delve deeper to understand why and adjust your budget or behavior accordingly. You may decide to allocate more funds to your grocery budget for the following months or find ways to reduce grocery expenses. This real-time feedback loop is invaluable for effective budget management.

Set Achievable Financial Goals

By highlighting your disposable income or the money left over after all cash outflows have been accounted for, a personal cash flow statement can help you set realistic financial goals, both short-term and long-term. This way, you’re not just aiming mindlessly but setting achievable targets.

For instance, if your cash flow statement reveals that you have $300 left each month after essential expenses, setting a goal to save $500 a month would be unrealistic and could leave you frustrated. On the other hand, a realistic goal based on your actual disposable income, such as saving 20% ($60) monthly, can improve your financial self-esteem and encourage you to maintain or improve your financial habits.

Evidently, setting achievable goals not only improves your financial self-esteem but also leads to a sense of accomplishment that motivates you to set and achieve more financial goals.

Effective Debt Management

Effective debt management is critical to eliminating liabilities within the shortest possible time to avoid unnecessary interest payments. A well-structured cash flow statement can reveal non-essential expenses you could cut back on or eliminate to free up funds to fast-track your debt repayment.

Consider this scenario: After creating a monthly cash flow statement, you notice spending $200 on gourmet coffee and $150 on streaming services. Making coffee at home and canceling a few subscriptions could free up $350 monthly or $4,200 annually!

When redirected to your credit card debt, this surplus can significantly reduce your outstanding balance and the interest you’d otherwise accrue, fast-tracking your path to being debt-free. Similar savings can be spotted in areas like dining out, unused gym memberships, or impulse online purchases.

Remember, staying disciplined with your repayment strategy is vital to managing and eliminating debt. Timely repayments free you from debt faster and improve your credit score, opening doors for better financial opportunities in the future.

Deeper Financial Analysis

The insights a personal cash flow statement provides are not limited to tracking income and expenses. By using your cash flow data, you can easily calculate key personal financial ratios. An example of these ratios is the debt-to-income ratio, calculated by dividing total monthly debt payments by total income.

Personal financial ratios are more than just numbers. Despite popular misconceptions, they are performance indicators that can help anyone gauge their financial health and make informed decisions. For example, lenders consider a debt-to-income ratio higher than 0.36 as a red flag. Your ratio exceeding this threshold may result in higher interest rates on loans or make it challenging to secure credit. In such a situation, it’s prudent, therefore, to reduce existing debt before attempting to take on additional debt.

By creating and regularly updating your cash flow statement, you can actively monitor these ratios, spot trends, and make adjustments to reach financial goals more effectively.

While a personal cash flow statement is invaluable for understanding your finances, it has limitations, which, when recognized, can lead to a more accurate interpretation of your data. Here are a few limitations to remember when analyzing a personal cash flow statement.

Doesn't Reflect Future Commitments

A cash flow statement primarily captures present transactions and doesn’t account for upcoming financial obligations like loan repayments or planned investments. For instance, if you’ve recently agreed to a car lease or plan to enroll in a long-term course next year, these commitments won’t appear in your current statement, potentially underestimating future expenses. You can neutralize this limitation by creating a forward-looking budget alongside your cash flow statement.

Doesn't Reflect Total Wealth

A cash flow statement won’t reflect the value of assets such as your home, car, investments, or savings, thus not fully representing your wealth. A balance sheet, on the other hand, provides a snapshot of your assets, liabilities, and net worth, offering a comprehensive view of your overall wealth. As such, it’s important to use your cash flow statement together with a balance sheet to get a complete picture of your current financial health.

Potential for Missed Expenditures

It’s easy to overlook some expenses, especially smaller or infrequent ones, which can make your cash flow statement inaccurate. One way to mitigate this limitation is by meticulously tracking all cash outflows, no matter how small. You can do this by using an expense tracking app, keeping all receipts, or reviewing bank statements.

Provide a Snapshot of a Specific Period

A personal cash flow statement only provides a snapshot of your cash inflows and outflows for a specific period, typically a month or a year. It does not reflect changes in your financial situation over time. For instance, if you faced a significant medical expense in January and then maintained a strict budget for the next few months, a cash flow statement for April might not reflect the financial strain you experienced at the start of the year. To track your financial progress, you need to regularly update and review your cash flow statement and compare it with previous periods.

Understanding your cash flow is essential for managing your finances effectively. A personal cash flow statement enables you to identify patterns, plan for the future, and make informed financial decisions. However, to get the most out of your personal cash flow statement, you need to be diligent in its creation and usage. Here are some pro tips for creating and using a personal cash flow statement effectively:

Record Everything

Record all inflows and outflows, no matter how small, to make your cash flow as accurate as possible. Even minor discrepancies can lead to an inaccurate picture of your financial health. For example, small expenses like daily coffee or occasional parking fees are often overlooked. However, a $5 daily coffee adds up to $150 monthly and $1,825 yearly. Assuming your yearly expenses amount to $36,000, you underreport your expenses by ~5% every year.

Use Accurate Time Frames

Make sure the time frame for your cash flow statement matches the time frame for your budget and financial goals. A monthly cash flow statement is appropriate for most people because many expenses and income sources occur on a monthly basis. However, if you have significant irregular expenses or variable income, you may need to review and update your cash flow statement more frequently, such as weekly or bi-weekly.

Be Specific

When noting your expenses, avoid grouping them into overly broad categories to understand your spending patterns better. For example, instead of vaguely listing $150 for “utilities,” you could break it down: $50 for “electricity,” $40 for “water,” $30 for “internet,” and $30 for “gas.” Such granularity can reveal surprising spending habits, like unusually high water cost that prompts leak checks or water conservation efforts.

However, it’s also crucial not to overwhelm your cash flow statement with excessive detail. Excessive details can clutter your statement, making it harder to identify overall trends or patterns quickly. For example, instead of listing “Netflix,” “Hulu,” and “Disney+” separately, group them under “Streaming Services”. The goal is to find a categorization balance that ensures your cash flow statement remains streamlined yet insightful, setting the stage for well-informed financial decisions.

Distinguish Between Essential and Non-Essential Expenses

Distinguishing between essential and non-essential expenses helps you identify areas to cut costs. Essential expenses are the basic costs incurred to maintain a safe and healthy living standard; they cover the fundamental needs required to live and work in modern society. Such expenses include groceries, housing, healthcare, utilities, and transportation. On the other hand, non-essential expenses are costs that enhance your life but aren’t vital for your basic survival. Dining out, vacations, luxury shopping, streaming services, etc., are non-essential expenses.

Note that essential expenses can differ based on individual circumstances and lifestyles. For example, if you work from home, high-speed internet becomes a necessity, whereas someone without remote work might view it as a luxury. It’s essential to recognize that what’s necessary for one person might be a luxury for another. Tailor your cash flow statement to reflect your unique needs and priorities.

Plan for Emergencies

Always ensure that you maintain a financial buffer for emergencies and unexpected expenses. Aim to set aside at least 3-6 months’ worth of living expenses in an easily accessible account. This duration is often optimal as it provides adequate coverage for scenarios like unexpected job losses, sudden medical bills, or major home repairs.

Keep your emergency fund in a high-yield savings account, where your money remains readily accessible and earns interest. You might also consider diversifying your emergency fund by putting a portion in money market accounts or short-term certificates of deposit for potentially higher returns.

Review and Adjust Regularly

Your cash flow statement is a dynamic document that should be reviewed and updated regularly. Regular updates help you stay on top of your finances and make necessary adjustments promptly. Update your cash flow statement as regularly as possible. Monthly updates are standard, but you may want to update more infrequently if your inflows and outflows rarely change.

Identify Areas for Cost Reduction

Make it a habit to regularly review your cash flow statement to pinpoint areas where you can trim expenses. If, for instance, you notice a significant portion of your money goes into dining out, consider cooking at home more often to reduce costs. Similarly, evaluate monthly subscriptions to see if there are any you no longer utilize, or consider cheaper alternatives to recurring expenses, ensuring every dollar is spent wisely.

Identify Opportunities to Increase Income

Review your cash flow statement regularly to identify opportunities for increasing your income. This could include asking for a raise, starting a side hustle, or investing in income-generating assets. For instance, if you have a skill like graphic design, you could begin freelancing and taking on small projects in your free time. Alternatively, investing in income-generating assets like dividend stocks or real estate can also increase your income.

Set Realistic Goals

Setting achievable goals for savings, investments, and debt repayment is crucial. For example, if your monthly income is $3,000, setting a goal to save $1,500 monthly may be unrealistic after accounting for all other expenses. Always consider all your essential expenses before setting aside a savings goal.

Use Technology

Using a financial tracking app or software can help you keep track of expenses and minimize omissions. Many apps like Mint, YNAB, Spendee, and PocketGuard offer features that can help you track your expenses, set budgets, and monitor your investments. Look for an app that allows you to categorize your expenses, set alerts for overspending, and provide a visual representation of your financial health.

Pair With Balance Sheet

Your personal cash flow statement is one part of your financial profile. Pairing it with a balance sheet provides more accurate insights into your financial status, allowing you to identify areas of vulnerability, such as looming debts, and opportunities, like potential investments.

By tracking your monthly net cash flow statement from the cash flow statement and your net worth from the balance sheet, you can strategically plan for future investments, debt repayments, and savings. For instance, if your cash flow statement shows a consistent surplus each month, but your balance sheet reveals high-interest debt, it might be wise to allocate some surplus towards that debt reduction.

Feel free to seek assistance from a financial advisor or planner if creating and managing your cash flow statement seems overwhelming. While a financial advisor can be helpful for anyone, it is especially beneficial for those with more complex financial situations, such as multiple income streams, significant debts, or an extensive investment portfolio. For example, if you have $20,000 in credit card debt, a financial planner can help you develop a plan to pay it off within a realistic timeframe.

Meet Sarah, a 24-year-old recent graduate who has just started her first job as a graphic designer in a reputable advertising agency. Now, with a steady income and eager to start on the right financial footing, she has decided to create a personal balance sheet to gain insight into her financial health.

Sarah has some student loans, a personal loan she took for a family emergency, has been using a credit card for daily expenses, and is living in a rented apartment. Although she had saved some money from part-time jobs during college, she’s unsure how her assets measure up against her debts. She aims to clear her debts, invest more, and contribute more to her retirement fund.

After reading this comprehensive guide on personal financial statements, Sarah decided to create a personal balance sheet to understand her financial status clearly and develop a financial plan.

Creating the Personal Balance Sheet

Sarah sets aside a weekend to organize her financial documents, online accounts, and other financial information to compile a comprehensive list of her assets and liabilities. She then begins by listing all her assets and liabilities meticulously.

LIQUID ASSETS

• Checking Account: $3,200
• Savings Account: $5,500
• Total Liquid Assets: $9,000

NON-LIQUID ASSETS

• Retirement Account (401k): $1,000 (from her new job)
• Investment Portfolio (a diversified set of index funds): $2,700 
• Car: $10,000 (current market value)
• Total Non-Liquid Assets: $13,700
• Total Assets: $22,700

LIABILITIES

SHORT-TERM LIABILITIES

• Credit Card Debt (20.93% annual percentage rate): $2,500
• Utility Bills (monthly): $200
• Personal Loan from a Friend (to be repaid within a year): $1,000
• Total Short-Term Liabilities: $3,700

LONG-TERM LIABILITIES

• Student Loans (10-year loan term; 6% fixed interest rate): $25,000
• Car Loan (7-year loan term; 9% annual percentage rate): $8,000
• Total Long-Term Liabilities = $33,000
• Total Liabilities = $36,700
• Net Worth = -$14,000

Interpretation and Action

Upon analyzing her Personal Balance Sheet, Sarah finds herself with a negative net worth, largely because of her student and car loans. She decides to take the following actions:

• Credit Card Payoff: Prioritize paying off her credit card debt first, as it has the highest interest rate (20.93%), and then pay off the car loan next, since it has the second-highest interest rate (9%). To achieve this, she decided to allocate 60% more of her monthly disposable income towards paying off the credit card debt. 
• Student Loan: Since her student loan has a low single-digit interest rate, Sarah figures there’s no pressing need to rush clearing her student loan. Maintaining her current monthly payment is more financially prudent, especially since student loan interest payments are tax deductible. However, she also knows paying off the loan earlier can save her some interest payments. For that reason, she plans to increase her student loan payments if she gets a chance to do so.
• Emergency Savings: Sarah understands the importance of having an emergency fund. Hence, she decides to save 20% of her disposable income each month until she accumulates a year’s worth of living expenses.
• Retirement Planning: Continue contributing to her 401k to take advantage of her employer’s match and the power of compound interest. 
• Investing: Sarah decides to postpone increasing her investment allocation until she has paid off her credit card debt. She understands that it will be challenging to generate real investment returns, seeing as the interest rate on credit card debt exceeds her portfolio’s annualized return.
• Cash Flow Statement: Create a detailed personal cash flow statement to monitor her income and expenses. Doing so will help her identify expenses she can cut back on and allocate more funds toward her debt repayment and savings goals.

Benefits Sarah Gained from Creating a Personal Balance Sheet

• Increased Financial Awareness: By creating her personal balance sheet, Sarah became more aware of her financial situation, which helped her to make informed financial decisions. She decided to prioritize paying off her credit card debt, postpone increasing her investment allocation until her high-interest debts were paid off, and start building an emergency fund. This heightened awareness also reduced her anxiety about her finances and increased her confidence in achieving her financial goals.
• Snapshot of Financial Health: The balance sheet provided Sarah with an overall view of her financial status, revealing that her liabilities significantly exceeded her assets. Her negative net worth was a clear signal that she needed to focus on debt reduction and savings. Identifying this financial weakness allowed her to create a targeted plan to improve her financial health.
• Financial Progress Tracking: By regularly updating her personal balance sheet, Sarah can monitor her wealth over time and see if she is progressing toward her financial goals. For example, as she pays off her debts, she will see a reduction in her liabilities and an increase in her net worth.
• Financial Planning: Creating the personal balance sheet enabled Sarah to begin creating a financial plan. She was able to set realistic goals for saving and debt repayment, giving her a structured path forward. 
• Advanced Financial Analytics: Creating a personal balance sheet made it easier for Sarah to calculate and track important personal financial ratios. For example, she could calculate her debt-to-asset ratio and use this information to make informed decisions about debt repayment and borrowing.

Limitations Sarah Overcame

• Doesn’t Show Cash Flow: While the personal balance sheet provided a snapshot of her financial situation, it did not show her cash flow. Recognizing this limitation, Sarah decided to create a detailed personal cash flow statement to monitor her income and expenses. Doing so would help her identify areas where she could cut back and allocate more funds toward her debt repayment and savings goals.
• Fluctuating Values: Sarah understood that the values of assets and liabilities could fluctuate over time. To mitigate this limitation, she decided to update her balance sheet every quarter to ensure that it always reflected her current financial situation. 
• Dependency on Accurate Data: Any oversights or inaccuracies could paint an incomplete picture of Sarah’s financial status, potentially leading her to make ill-informed decisions. To overcome this limitation, she meticulously included every asset and liability, no matter how small, and validated the values by checking her bank statements, credit card statements, investment account statements, and other financial records. Additionally, she used financial management apps to automatically pull and consolidate data, further enhancing the accuracy of her balance sheet.
• Subjective Asset Valuation: Knowing that misvaluing her assets can make her balance sheet inaccurate, Sarah used the current market value for her car and checked the most recent statements for her savings and investment accounts.

Pro Tips Sarah Followed

• Regular Updates: Sarah set a reminder to update her Personal Balance Sheet every quarter to track her financial growth and to recalibrate her plans as needed.
• Be Thorough: Sarah included all her assets and liabilities, no matter how small, to ensure her balance sheet was comprehensive.
• Accurate Valuation: As mentioned earlier, Sarah made sure to use the current market value for her car and checked the most recent statements for her savings and investment accounts.

Creating a personal balance sheet was a transformative experience for Sarah. The exercise gave her the information and motivation she needed to take control of her financial future. It provided her with a clear and comprehensive view of her financial situation, enabling her to create a targeted plan to improve her financial health.

Before creating her balance sheet, Sarah often felt overwhelmed by the abstract notion of “net worth” and “financial health.” But after this exercise, these abstract worries solidified into tangible numbers and action points.

Though she started with a negative net worth, Sarah now has a roadmap for eliminating debts and increasing her assets. With a clear roadmap in place, she is now confident in her ability to manage her finances effectively and work towards a secure financial future. This is all thanks to the simple yet enlightening exercise of creating and maintaining her personal balance sheet.

Having already evaluated her net worth via her Personal Balance Sheet, Sarah recognized the importance of tracking her monthly income and expenses. She knows that understanding her cash flows will help her stay on course with her financial goals.

As a recent graduate thrust into the real world with her first job, Sarah was determined not to succumb to the all-too-familiar pitfalls of unchecked spending and minimal savings. Earning a consistent paycheck ($4,500) and living by herself means she has inflows and outflows to monitor closely. And with goals like repaying debts, building an emergency fund, and future investments in mind, it became clear to Sarah that she needed a comprehensive tool to keep tabs on her money.

Creating the Personal Cash Flow Statement

Taking another weekend, Sarah organizes her bank statements, pay stubs, bills, expense-tracking app printouts, and receipts she has accumulated over the past month to compile an accurate cash flow statement. She then begins listing down all sources of cash inflow and outflow.

CASH INFLOWS

• Base Salary from Advertising Agency: $3,420 (after a 24% tax deduction)

FREELANCE INCOME

• Graphic Design Projects: $996

INVESTMENT RETURNS

• Dividends from Index Funds: $35

NON-INVESTMENT PASSIVE INCOME

• Affiliate Marketing from Personal Design Blog: $236
• Ad Revenue from Personal Design Blog: $112
• Sale of Old Laptop: $300
• Total Cash Inflows: $5,099

CASH OUTFLOWS

ESSENTIAL EXPENSES

• Rent: $1,200
• Groceries: $300
• Utilities: $200 (including electricity, water, and internet)
• Gas (for transportation): $120
• Health Insurance (deducted from her salary): $120
• Car Insurance: $90
• Personal Care (haircuts, toiletries): $60
• Public Transportation: $50
• Total Essential Expenses: $2,140

NON-ESSENTIAL EXPENSES

• Dining Out: $250
• Miscellaneous Purchases: $100
• Gym Membership: $50
• Streaming Services (Netflix, Spotify): $25
• Total Non-Essential Expenses: $475

DEBT PAYMENTS

• Student Loan Repayment: $300
• Car Loan Payment: $200
• Credit Card Minimum Payment: $100
• Personal Loan from a Friend: $100
• Total Debt Payments: $700
• Savings Account Contribution: $500
• 401k Contribution: $225 (5% of her gross salary)
• Total Savings: $775
• Investment into Index Funds: $200
• Total Investments: $200
• Total Cash Outflows: $4,140
• Net Cash Flow: $959

Upon completing her personal cash flow statement, Sarah is relieved to see a positive net cash flow of $959. This positive net cash flow means she’s living within her means and has a surplus after paying all monthly obligations.

However, she recognized that $300 of the surplus was from a one-time sale of her old laptop—an irregular form of income. This meant that her consistent net cash flow was actually $659—give or take a couple of dollars due to the unpredictable nature of her non-investment passive income.

With this in mind, she decided to further allocate her net cash flow towards:

• Caution with Irregular Income: She decided not to rely on her asset sale for recurring monthly expenses. Instead, she’d treat such irregular income as a bonus. 
• Debt Acceleration: In a bid to reduce high-interest liabilities faster, Sarah allocated an additional $395.40 (or 60% of her monthly disposable income) from her regular surplus towards her credit card debt, increasing the monthly payments to $495.40. By so doing, she will pay off the debt within five months, as long as she doesn’t incur any more credit card debt.
• Emergency Fund Boost: After accounting for the credit card payment, she decides to save an extra $131.80 (20% of $659) from her regular surplus to her emergency fund, bolstering her financial safety net. 
• Personal Loan Payoff Strategy: Remembering the personal loan she took for a family emergency, she committed to allocating 20% of her monthly disposable income to repay it faster. This would amount to $131.80 (20% of $659) every month, in addition to the $100 she currently pays, taking the total monthly payment to $231.80. Sticking to this payment strategy will help her pay off the loan within five months, as opposed to the initial ten.
• Non-Essential Expenditures Review: Sarah observed that her dining out expenses were relatively high. So, she decided to reduce it by $100 (40%) and divert that amount towards her student loan repayment. Doing so will help her pay off the loan three years earlier and save $2,868 in interest payments.
• Car Loan: Sarah realized that by paying $200 monthly, she was already on track to pay off her car loan within four years, three years earlier than her loan term, saving $1,270 in potential interest payments.
• Passive Income : Seeing the success of her personal design blog, Sarah considered investing more time to increase her advertising and affiliate marketing income.

Benefits Sarah Gained From Creating a Personal Cash Flow Statement

• Enhanced Financial Awareness: Sarah better understood her financial status after creating her cash flow statement. This exercise helped her spot patterns, such as her monthly takeout habit, making her reconsider her spending decisions.
• Precise Goal Setting: Sarah found it easier to set financial targets once she knew her disposable income. This ensured she wasn’t setting herself up for failure but creating realistic and achievable financial objectives.
• Effective Debt Management: Completing the cash flow statement, Sarah was better poised to manage her multiple debts. Recognizing the prudence of paying off high-interest debts first, she drafted a strategic repayment plan, saving herself from additional interest accumulation.
• Temporary Snapshot: Sarah understands that the cash flow statement provides data for a specific period. Thus, she plans to review and update hers regularly to monitor financial changes over time.
• Wealth Indication: Aware that the cash flow statement doesn’t reflect total wealth, Sarah complements it with a personal balance sheet to gauge her overall financial health.
• Expenditure Accuracy: Sarah addresses the challenge of overlooked expenses by meticulously tracking every penny, often using financial tracking apps for accuracy.
• Regular Review: Sarah plans to diligently review her cash flow statement every month to ensure it’s updated and reflective of her current financial state. 
• Digital Assistance: Sarah uses expense-tracking apps to automatically categorize and track her inflows and outflows to streamline the process.
• Emergency Preparedness: Sarah maintains an emergency fund, understanding the unpredictability of life events.

Creating a personal cash flow statement was yet another financial eye-opener for Sarah. Just as the personal balance sheet had given her insight into her net worth, the cash flow statement offered her a clear view of her monthly financial activities. She could see where her money came from and where it was going, ensuring she wasn’t merely flying blind when managing her monthly expenses and income.

Sarah’s positive net cash flow is encouraging, and her decisions to accelerate debt repayment and consistently increase her savings demonstrate both proactiveness and foresight. Armed with the insights from her cash flow statement, she is now even more committed to fortifying her financial resilience, ensuring she is not just living for the present but is also well-prepared for the future.

Want a hassle-free way to monitor your finances? Download our free personal financial statement template. Easy to use and fully customizable—it’s everything you need to keep track of your assets, liabilities, and cash movements.

DOWNLOAD: Personal Balance Sheet and Cash Flow Statement Template

How to Use the Template

The template is a view-only file and can’t be edited. To use, click on “File” and then select “Make a copy.” This will get you a copy of the template that can be modified.

Don’t request edit access, please.

In today’s complex economy, tools like a personal balance sheet and a cash flow statement aren’t just nice to have—they’re essential for understanding and navigating your finances.

Think of the balance sheet as a still photo, capturing your assets and liabilities in one snapshot. It allows you to calculate your net worth and can highlight areas for improvement. In contrast, the cash flow statement is like a movie, illustrating the dynamic movement of your funds and providing insights into your liquidity and spending habits.

Individually, these statements offer valuable insights, such as revealing if you’re splurging too much on non-essentials or if debts are becoming unmanageable. Yet, when combined, they paint a comprehensive picture of your financial standing and habits. This dual perspective ensures you know your financial status and how your habits shape it.

As illustrated by the case studies, creating these financial statements is simple, especially with the templates provided in this guide. These templates simplify the process of creating these statements with their auto-calculating fields and intuitive categories. They guide you through the process, minimizing errors. Remember, keeping these statements updated is vital to ensuring you’re on track with your financial goals, be it budgeting, retirement planning, or merely gauging your fiscal health.

Feel free to work with a financial planner or advisor if you find it challenging to decipher and leverage insights from your financial statements. Not only can they assist you in understanding these statements, but they can also offer personalized strategies tailored to your unique financial situation. Beyond helping you interpret these statements, they can also advise on investments, tax planning, and other aspects of financial management that might be outside your comfort zone.

By understanding, creating, and maintaining these personal financial statements, you’ll have the tools to navigate your financial journey, align your financial habits with your goals, and build a secure financial future.

Remember, maintaining and reviewing these statements regularly is as important as their initial creation. As your financial situation evolves—like with a new job, added expenses, or changes in investments—your statements should reflect those shifts to offer accurate insights. So, watch those numbers, make wise choices, and remember—you’ve got this!

About the Author

Abolade Akinfenwa is a multi-certified finance professional. He’s certified as a Financial Modeling & Valuation Analyst (FMVA)®, Capital Markets & Securities Analyst (CMSA)®, Commercial Banking & Credit Analyst (CBCA)®, Financial Planning & Wealth Management Professional (FPWM)™, and FinTech Industry Professional (FTIP)™. With over three years of experience as a Financial Writer, Abolade specializes in helping finance professionals build authority and generate qualified leads for their services. Interested in collaborating or seeking insights? Connect with Abolade via LinkedIn or Twitter , or email him at [email protected] .

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• Assessing Your Financial Health: Top 22 Personal Financial Ratios
• How to Plan Your Finances Using the 50-30-20 Budgeting Rule (Plus Case Study and Free Template)

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What Is a Personal Financial Statement?

Definition and Examples of a Personal Financial Statement

Anchiy / Getty Images

A personal financial statement is a document that details an individual's assets and liabilities. It's often used by lenders to learn a loan applicant's net worth and other details of their financial life.

Learn how to prepare a personal financial statement, and why it's so important for loans. 

What Is a Personal Financial Statement? 

A personal financial statement details your finances in a simple form. This is an important document for those seeking a business loan proposal. It allows lenders to quickly glean your assets and liabilities. If you are married, the personal financial statement may include your spouse's assets and liabilities, as well. 

Your assets are the things you own that you can turn into cash, such as a home, a checking account balance, or stocks. Your liabilities are amounts you owe to others, such as your mortgage, student loans, and credit card debt.

Your net worth is the difference between your assets and your liabilities, so your financial statement will allow lenders to determine your net worth. For example, if you have a house and a car with a value of $100,000, and you have a mortgage and car loan for $75,000, your net worth is $25,000.

Net worth for an individual is similar to owner's equity for a business. Therefore, a personal financial statement is similar to a business's balance sheet .

How a Personal Financial Statement Works

If you are presenting a business plan or business loan request to a lender, they will probably ask for a personal financial statement. You may be asked to provide a personal guarantee for part of the loan, or you may have to pledge some of your personal assets to guarantee the loan (this is called a "collateral loan"). 

If you have to pledge some of your assets, the personal financial statement will be required so the lender can see if you have enough assets to cover the loan. The personal financial statement will also detail the kinds of assets you have. For example, if you are pledging investments (like an IRA or 401k), the bank will need to know the amount of the investment and where it is kept.

The Small Business Administration (SBA) has a  sample personal financial statement  you can use to collect the information you need.

How Do I Prepare a Personal Financial Statement?

The format of the personal financial statement is standard. It shows assets on the left and liabilities on the right (like a balance sheet). Net worth is also displayed on the right-hand side of the statement. 

To begin, start gathering information about assets and liabilities. The people reading your personal financial statement know that it simply captures your net worth a point in time, so prepare the document with the most recent information you have, but don't worry if some of the documents are a few weeks old. Your lender understands that some of this information is constantly in flux.

Some of the assets and liabilities that should be listed include:

• Cash in a checking or savings account
• An IRA, 401(k), or any other retirement accounts
• Brokerage accounts
• A copy of the latest statement on your home mortgage, with the balance outstanding (you may also need a recent appraisal )
• A copy of the latest statement on your car loan, boat loan, or any other loans
• Personal property with significant value that can be verified with an appraisal, such as antiques or jewelry (but not household goods or furniture)
• Credit card debt, and any other debt that may show up on a credit report
• Any joint debt you took on by being a co-signer on a loan with someone (this is called a "contingent liability")
• Money owed from a small claims judgment, lien , or similar outstanding liabilities
• Unpaid taxes from previous years, including any business payroll taxes for which you are personally responsible

Some assets—like stocks—have a clear dollar value, but not all assets are as easy to account for. If you are unsure of the value of assets, do your best to get a reasonable figure, but be realistic. If the lender wants to use the asset for a guarantee on your business loan, they will do an appraisal.

Rentals aren't included in a personal financial statement, because there is no ownership. Renting a house or leasing a car creates a monthly expense, but you don't own these items, so they don't get included in this statement unless you're specifically asked to detail your expenses.

Some personal financial statement formats ask you to include your annual income and expenses. The income should match your most recent income tax return. The expenses should include taxes, insurance payments, and an estimate of any other regularly occurring expenses.

As part of your preparation for presenting your business plan, you should run a complete credit report on yourself. The lender will certainly do this, and you want to know what they'll find. This means going beyond the FICO score to get a full report that shows details.

When you have entered all the information on assets and liabilities, you can finally calculate your net worth by subtracting the liabilities from the assets.

You may find that you have a negative net worth, meaning that you owe more than you own. If that's the case for you, don't try to change the document by eliminating liabilities or over-estimating assets; just accept your situation. Knowingly misrepresenting yourself on a financial statement could result in up to five years of imprisonment and a fine of up to $250,000.  

Key Takeaways

• A personal financial statement is a document that details a person's assets and liabilities.
• Personal financial statements are often used by lenders to assess the net worth of loan applicants.
• Lying on personal financial statements can result in hefty criminal penalties.

Small Business Administration. " Personal Financial Statement ," Page 3. Accessed June 30, 2020.

What Is Personal Financial Statement: A Comprehensive Guide

August 17 2023   |   By Wajiha Danish   |   7 minutes Read

Understanding the Personal Financial Statement  

2. Liabilities

3. net worth.

Assessing Your Financial Goals  

Evaluating Your Financial Statement  

1. Accuracy and Completeness

2. liquidity, 3. debt-to-income ratio, 4. net worth growth, 5. emergency fund, 6. investment portfolio, 7. retirement planning, 8. budget analysis, 9. tax efficiency, 10. professional guidance.

Steps for Effective Personal Finance Planning and Management  

1. Set Clear Financial Goals

2. assess your current financial situation, 3. create a budget, 4. track your spending, 5. manage debt, 6. build an emergency fund, 7. save and invest, 8. plan for major expenses, 9. review and adjust, 10. educate yourself, 11. insurance and estate planning, 12. minimize taxes, 13. seek professional advice, 14. practice discipline and patience, 15. celebrate milestones, get this week’s best content.

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Managing your finances is crucial for achieving financial stability and long-term goals. One of the fundamental tools at your disposal is the personal financial statement to assess your financial health and make informed decisions. In this in-depth blog, we will delve into the intricacies of evaluating your financial statement, helping you better understand your financial position and charting a course toward a more secure future.   

Understanding the Personal Financial Statement   

A blank personal financial statement is a snapshot of your financial situation at a specific time. It outlines your assets, liabilities, and net worth. Let’s break down each component:   

Assets encompass everything you own that holds monetary value. It includes cash, investments, real estate, vehicles, personal belongings, and more. Categorizing and valuing your assets is essential for a realistic assessment.   

Liabilities represent your debts and financial obligations. It includes credit card debt, loans, mortgages, and outstanding payments. Identifying your liabilities is crucial to gauge your financial obligations accurately.   

Net worth is calculated by subtracting your total liabilities from your total assets. It is a key indicator of your financial health and can help you understand whether you’re building wealth or accumulating debt.   

Assessing Your Financial Goals   

Before diving into the evaluation process, establish clear financial goals. These could include saving for a down payment on a house, paying off debt, funding your children’s education, or retiring comfortably. Understanding your goals will guide your assessment and help you allocate resources accordingly.   

Evaluating Your Financial Statement   

Begin by ensuring that your blank personal financial statement is accurate and comprehensive. Update it regularly to reflect your current financial position and ensure you haven’t omitted any assets or liabilities.   

Liquidity refers to your ability to access cash quickly without incurring significant losses. Evaluate how much of your assets can be easily converted to cash, such as savings accounts, money market funds, and liquid investments. A healthy liquidity ratio ensures you can handle unexpected expenses or capitalize on opportunities. 

Your debt-to-income ratio measures the percentage of your monthly income for servicing debt. A high ratio indicates that a significant portion of your income is tied up in debt payments, which could affect your ability to save and invest. Strive for a manageable debt-to-income ratio to maintain financial flexibility.   

Regularly monitor your net worth to track your financial progress. A growing net worth suggests effective financial management, while a declining net worth may necessitate adjustments to your spending, saving, or investment strategies.   

Evaluate the adequacy of your emergency fund, which acts as a safety net during unforeseen events like medical emergencies or job loss. A good rule of thumb is to save three to six months’ worth of living expenses in an easily accessible account.   

Assess the composition of your investment portfolio. Diversification across different asset classes helps manage risk and potentially enhance returns. When reviewing your portfolio, consider your risk tolerance, investment horizon, and financial goals.   

Analyze your retirement savings and contributions to retirement accounts such as 401(k)s or IRAs. Use retirement calculators to estimate if your current savings rate will provide the income you need in retirement.   

Compare your monthly income and expenses to identify areas where you can cut back or allocate more funds toward your financial goals. A detailed budget can help you make informed spending decisions.   

Examine your tax strategies to minimize tax liabilities. Maximize the use of tax-advantaged accounts and consider tax-efficient investment strategies.   

If navigating your blank financial statement seems overwhelming, seek guidance from financial advisors or professionals. Their expertise can provide valuable insights and help you create a personalized plan. 

Steps for Effective Personal Finance Planning and Management   

Effective personal finance planning and management is crucial for achieving financial stability, reaching your goals, and building wealth. Here’s a detailed step-by-step guide to help you navigate this process:   

Start by defining your short-term, medium-term, and long-term financial goals. These could include saving for a vacation, buying a house, paying off debt, building an emergency fund, or planning retirement.   

Make your goals specific, measurable, achievable, relevant, and time-bound (SMART).   

Gather all your financial information, including income sources, expenses, debts, assets, and investments.   

Create a net worth statement to understand your financial health – assets minus liabilities.   

Develop a detailed budget outlining your monthly income and all expenses, including fixed and variable costs.   

Prioritize essential expenses (housing, utilities, groceries) and allocate a portion of your income to savings and investments.   

Use budgeting tools, apps, or spreadsheets to monitor your spending habits.   

Regularly review your expenses to identify areas where you can cut back and save more.   

Prioritize paying off high-interest debts, such as credit cards, as quickly as possible.   

Consider consolidating or refinancing debts at lower interest rates.   

Avoid taking on unnecessary debt and use credit responsibly.   

Save three to six months’ living expenses in an easily accessible account.   

This fund acts as a safety net in case of unexpected expenses or job loss.   

Contribute to retirement accounts (401(k), IRA) and use any employer matching.   

Diversify your investments across various asset classes (stocks, bonds, real estate, etc.) to manage risk.   

Regularly contribute to investment accounts and take advantage of compounding returns.   

Set up separate savings accounts for specific goals (e.g., car buying, home down payment, education).   

Allocate a portion of your budget towards these savings goals.   

Regularly review your budget, financial goals, and investment portfolio.   

Adjust your plan as needed based on income, expenses, or goals changes.   

Stay informed about personal finance concepts, investment strategies, and tax implications.   

Attend financial literacy workshops, read books, and follow reputable financial experts.   

Ensure you have adequate insurance coverage, including health, life, and disability insurance.   

Create or update your will, designate beneficiaries, and establish a power of attorney and healthcare proxy.   

Optimize your tax strategy by taking advantage of tax-advantaged accounts and deductions.   

Consult a tax professional to ensure you’re making informed decisions.   

Consult a certified financial planner (CFP) or financial advisor to help you create a comprehensive financial plan tailored to your goals and circumstances.   

Stick to your budget and financial plan over the long term.   

Avoid impulsive spending and emotional decisions regarding investments.   

Celebrate your financial achievements and milestones to stay motivated on your journey to financial success.  

Remember that personal finance is a continuous process, and adjusting as your circumstances change is okay. By following these steps and staying disciplined, you’ll be well on your way to effective personal finance planning and management.   

Evaluating your blank personal financial statement is a fundamental step toward achieving financial well-being. Regular assessment of your assets, liabilities, and net worth, along with a thorough analysis of your financial goals, provides a comprehensive view of your financial health. By understanding key indicators such as liquidity, debt-to-income ratio, net worth growth, and investment portfolio, you can make informed decisions to secure your financial future. Remember, financial success is a journey, and continuous evaluation and adjustments are essential to stay on the path to achieving your goals. For more information and new insights on ongoing accounting and financial topics, contact Monily at [email protected] or visit monily.com.  

Also Read: Accounts Receivable Turnover Ratio – Key To Better Finances

Wajiha Danish

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• Personal Financial Statement

Written by True Tamplin, BSc, CEPF®

Reviewed by subject matter experts.

Updated on November 15, 2023

Get Any Financial Question Answered

Table of contents, what is a personal financial statement.

A personal financial statement is a report or set of documents that summarizes an individual's financial situation at a particular time.

It is often divided into two sections: the balance sheet and the income statement.

The balance sheet provides a breakdown of assets and liabilities, while the income statement summarizes income and expenses.

General information about an individual, such as name and address, may also be included in a personal financial statement.

Individuals can use personal financial statements to monitor their current economic situation.

What Personal Financial Statement Includes

A personal financial statement is typically divided into two sections. These are:

Balance Sheet

The financial statement contains a section known as a balance sheet, which summarizes a person's assets, including cash and investments , and liabilities like debts or loans.

The balance sheet is also used to calculate an individual’s net worth, which is the value of assets minus the amount of liabilities.

Income Statement

The next section, the income statement , details the flow of income and expenses that influences a person's financial situation.

Income statements list all sources of income, such as salaries, bonuses, and dividends .

Expenses such as insurance payments, electricity, or grocery bills are also included.

What Personal Financial Statement Excludes

A personal financial statement does not include the following items:

Company Assets and Liabilities

Company resources and debts are removed from the financial statement unless the individual has direct and personal responsibility.

When someone personally guarantees a loan for their business, the loan is included in their personal financial statement.

Loaned Items

Loaned assets are not owned, so they are not included in personal financial statements.

However, if an individual owns a property and rents it out to others, then the property's value is included in the financial statement list.

Personal Belongings

Furniture and home goods are often not shown as assets on a personal balance sheet since they cannot be easily sold to pay off a loan.

Personal goods with high monetary value, such as jewels and antiques, may be included if their worth can be shown by an evaluation.

Personal Financial Statement Example

Let us look at an example of a personal financial statement using the hypothetical case of Jeffrey.

Below is an example of what Jeffrey’s balance sheet may look like in spreadsheet form.

As shown above, Jeffrey has $295,500 worth of assets. This includes the assets like a house, a vehicle, bank accounts, and a retirement account.

Now let us say he has $101,000 in liabilities as well. This includes credit card debts, student loans and mortgages.

With this information, his balance sheet should reflect a net worth of $194,500.

Here is an example of what Jeffrey’s income statement may look like in spreadsheet form:

As shown above, Jeffrey receives a total monthly income of $14,200 and spends a total of $8,610 in expenses.

After subtracting expenses from income, Jeffrey has a net income of $5,590.

Taken together, Jeffrey’s balance sheet and income statement provide useful information about his current financial situation.

How to Create a Personal Financial Statement

Let us look at a guide on how to create a personal financial statement.

How to Create a Personal Balance Sheet

• List All Assets

Indicate the dollar value of the assets to be declared. Accuracy is important, particularly when creating a statement for the purpose of borrowing.

Find the total value of all available assets.

• List All Debts

Liabilities come from debts. State the obligations that have to be settled and debts to be paid.

Common items include credit card debts, mortgage debts, and student loans.

Find the total value of all liabilities.

• Determine the Net Worth

Net worth is calculated by deducting total liabilities from total assets.

How to Create a Personal Income Statement

• List all Money Received from Various Sources

Determine the amount of money coming in from various sources. This usually includes regular income received monthly.

• List all Expenses

Make a list of all monthly spending. Start with fixed costs before moving to variable costs.

• Determine Net Profit or Loss

The net profit or loss can be calculated by subtracting the total monthly expenses from the total income or revenue generated in that month.

Importance of a Personal Financial Statement

Here are some reasons why it is important to create a personal financial statement.

Financial Planning

A personal financial statement is an important tool that can be used for financial planning.

It provides a snapshot of an individual's financial situation at a particular point in time, which can be helpful in making future projections and plans.

The statement can also be used to track progress over time and to identify areas where improvements can be made.

Personal financial statements are essential when filing taxes because they summarize income made throughout the year.

They also provide an idea of possible deductions that can be made to lower an individual’s tax rate.

Loan Application

Personal financial statements are often required when applying for credit, such as a loan or mortgage .

Lenders use the information in the statement to assess an individual's ability to repay the debt and to determine the interest rate that will be charged.

In some cases, a personal financial statement may be used in lieu of a credit report when applying for credit.

Final Thoughts

A personal financial statement can be a helpful tool in managing finances and making future plans.

Personal financial statements include balance sheets to monitor assets and liabilities and income statements to track an individual’s income and expenses.

Details on the assets and liabilities related to an individual’s businesses, any rented items and personal belongings are not included in a personal financial statement.

Personal financial statements can be used for a variety of purposes, including financial planning, overviewing an individual's financial situation, and loan applications.

Personal financial statements must be updated on a regular basis to provide an accurate picture of an individual’s current economic situation.

Personal Financial Statement FAQs

What is a personal financial statement.

A personal financial statement is a report or set of documents that summarizes an individual's financial situation at a particular time.

What is included in a personal financial statement?

A personal financial statement includes information on an individual's balance sheet and income statements. The balance sheet provides a summary of assets and liabilities, whereas the income statement summarizes revenue and costs.

What is excluded from a personal financial statement?

Personal financial statements do not include details of a company’s assets and liabilities, loaned items, and personal belongings.

Why is a personal financial statement important?

It is important because it provides a snapshot of an individual's financial situation at a particular point in time. It can help to identify areas where expenses may be excessive or where there is room to make cuts in order to save money. The statement can also be used to track progress toward financial goals.

What does a personal financial statement show?

A personal financial statement shows an individual's assets, liabilities, income, and expenses. It can help to identify areas of financial strength and weakness and to track progress over time.

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide , a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University , where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website or view his author profiles on Amazon , Nasdaq and Forbes .

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A Personal Financial Statement Example – What to Include

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A personal financial statement is a document that summarizes an individual’s financial position at a specific moment in time. It typically contains a breakdown of all your assets and liabilities, giving you an insight into your financial position and financial health.

Assets are things with economic value that you can turn into cash, such as your home. Liabilities are money that you owe others, such as loans.

A personal financial statement contains your personal information, a balance sheet, and your income statement.

Components of A Personal Financial Statement

Personal information.

Some personal information that might be outlined in a personal financial sheet is your full name, home address, and total assets and liabilities.  

A Balance Sheet

A personal balance sheet includes detailed information regarding your assets, liabilities, and equity. Personal equity is also known as capital or net worth . It is the money that is left over after selling all of your assets and paying off all of your liabilities.

In most balance sheets, the total assets are listed on the left side, while liabilities and equity are listed on the right side. Assets are listed based on how quickly they will turn into cash.

The two main asset types are current and noncurrent assets. Current assets are resources that you expect to convert into money within a year. Noncurrent assets are those that take more than a year to turn into cash.

When it comes to liabilities, they are listed based on their due dates. Current liabilities are those that you expect to pay off within a year. Long-term liabilities are those that you anticipate to pay off in more than a year.

The Income Statement

A personal income statement gives a summary of your incomes and expenses for a specific period. Income is what you earn from salaries, wages, interests, operating cash flows, or dividends.

Expenses are the costs of the things you consume for your daily living.

The difference between the two becomes your net cash flow. An income statement helps you calculate your net cash flow.

If your income is more than your expenses (positive cash flow), you have a surplus that you can save or add to your expenses. If your income is less than your expenses, you have a deficit that you should address before it creates debts.

Since a personal cash flow statement is detailed, it can also help you manage your income and living expenses.

You can identify which expense is taking most of your income if you want to reduce your expenses. It also gives you some insight into your personal cash flow, making it easier for you to plan towards your financial goals. Accrual accounting can help you track your income and expenses. Follow GAAP standards while recording such information.

Assets and Liabilities

We’ll discuss various types of assets that you can put on your income statement.

Immediate Assets

Immediate or quick assets are assets that turn into cash within a short period. They also refer to those that are already in cash form.

Another requirement for a personal asset to qualify as a quick asset is that it loses little to no value when converted into cash. Quick assets mainly include accounts receivable, emergency fund, cash, marketable securities, and cash equivalents.

Retirement Accounts

A retirement account can also be called an IRA, Individual Retirement Account. An IRA is a tax-advantaged individual account that you can use for your retirement savings.

Setting up an IRA helps you cut your tax bill, prepare for retirement, and get access to many investment options your workplace retirement plan does not offer.  

Business Assets

Business assets are valuable items that your business creates, owns, or provides benefits for it. These assets include intellectual property, cash, buildings, stock, or even buildings.

When put on a balance sheet, business assets are put in order of liquidity and historical cost. It appears as an item of ownership on the balance sheet.

Fixed Assets

Fixed assets are long-term tangible items such as equipment or properties that you own and use to generate income. Fixed assets are also known as capital assets.

These assets are long-term and can take more than a year to be converted into cash. Fixed assets can include buildings, land, machinery, among others.

Fixed assets typically appear on a personal balance sheet as property, plant, and equipment (PP&E).

A vehicle is a long-term asset account that keeps track of your automobiles, trucks, etc. The vehicle account, like fixed assets, appears on a balance sheet as property, plant, and equipment (PP&E).

For your net worth to be accurate, you should keep adjusting your vehicles’ value since they depreciate over time.

Children Accounts  

Children’s accounts are long-term assets used primarily to save money for your child’s post-high school education. The accounts are usually a restricted-use policy to ensure it stays until your child finishes his/her high school education.

Liabilities

Credit card balance.

Credit card debt is the amount of money a person owes for any purchases made by the credit card.

Since it is a current liability, a person pays the amount within a normal operating cycle, usually within 12 months. Credit card debt accumulates when one opens several credit card accounts.

A bank loan is the amount of money a financial institution lends you for a specified period. Bank loans can be for virtually any purpose (business loan, SBA loan, or personal loan).

Most banks impose an interest rate on loans taken based on your credit history. The total amount of your debt is the amount borrowed plus the specified interest.

Student Loans

A student loan is a type of loan acquired to assist students in paying for their post-high school education and related costs such as books, living expenses, and tuition. It is a long-term liability as it becomes due or matures at a certain date.

Back taxes are taxes that were not fully paid in the fiscal year in which they were due. They regularly accumulate penalties and interests the longer you delay. The total income tax debt will be taxes plus penalties charged.

How Assets and Income Work Together

Well, you can use your income to purchase income-generating assets such as stocks, real estate, and bonds.

With time, those assets will start to generate profits that can boost your total income and increase your cash flow. Instead of spending your earned income to acquire liabilities, you can build wealth slowly by purchasing income-generating assets.

Here’s a quick breakdown of how assets and income can work based on the financial decisions of different people:

Make money work for you by investing it in income-generating assets. You can also check out your net worth with our Best Net Worth Tracker here.

How Liabilities and Expenses Work Together

Liabilities are the debts you owe others, while expenses are costs of items you consume daily and payment can be immediate through cash.

Liabilities are listed on the balance sheet, while expenses are included on the income statement. They may seem completely different, however, they correlate with one another.

If they surpass your income, then you have a deficit that can eventually evolve into debt. As a result, your total liabilities will end up increasing.

An increase in expenses can eventually increase your liabilities if they are still due past the specified time. By successfully managing your expenditure, you can significantly reduce your liabilities or debt.

Reducing your expenses to increase your income can help you pay off some of your debts, lowering your overall outstanding debts.

Special Considerations

A personal financial statement gives you some insight into the assets that you own and the liabilities that you owe to different organizations.

Examples of such assets include retirement accounts, checking accounts, savings accounts, and trading accounts. On the other hand, a personal financial statement also breaks down liabilities such as credit card debt, back taxes, and personal loans.

Not to mention, you can also create a joint personal financial statement with your spouse that will help you know your financial state and make a solid financial plan.

If you are married, your financial statement can also cover your partner’s assets and liabilities. It will help you calculate your total net worth.

Moreover, your net income and liabilities can also be listed on a personal financial statement. While this personal financial document gives you insight into your financial situation, some items cannot be listed on a personal financial statement.

Examples of such items include:

• Rented things
• Personal properties
• Business-related liabilities and assets

A personal statement gives you some insight into your financial position, making it easier for you to manage your assets, liabilities, income, and expenses. Once you get insight into your financial condition, you will be able to plan towards your financial goals. You can sample personal financial statement from different templates.

A personal financial statement template shows you the components that should be included in your own statement. Not to mention, a personal financial statement example can guide you as you are creating your own statement.

To continue learning about financial literacy, see the following articles in the series:

• Good Debt vs. Bad Debt: Know The Difference
• How To Create A Personal Balance Sheet
• Is It Better to Put a Large Down Payment on a House
• Dave Ramsey vs. Robert Kiyosaki: Who Should You Listen To?
• Personal Income Statement
• How to Use Credit to Build Wealth

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I am a Certified Lending and Credit Specialist and first gained experience fixing my own credit. My own credit scores went from the 500s to the 800s in one year. I studied economics at The George Washington University and now have my own business working with financial technology companies. I manage my own investments and live in Salt Lake County, Utah with my wife and two kids.

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Why All Small Business Owners Need a Personal Financial Statement

Running a small business is exhilarating, demanding and often a blur of financial uncertainty. While most entrepreneurs focus on their business’s bottom line and keep their financial statements current, they often neglect to document their personal finances. That’s wrong. Every small business owner needs to create a personal financial statement (PFS), which serves as a personal balance sheet, documenting your assets, liabilities and net worth. 

When do you need a personal financial statement?

Many small business owners may need a loan or other outside financing as they grow their companies. That usually requires providing a lot of documentation to the lender. But lenders don’t only want to see your business finances. Most require a personal financial statement as well.

If you decide to pledge personal assets as collateral, lenders definitely want to know the details about those assets. Financial institutions may wish to conduct a fiscal health evaluation of your personal finances so they can assess how well you manage money. For instance, if you have few assets and a lot of outstanding debt, it can indicate you would have trouble repaying a loan.

Are you thinking of buying an existing business or a franchise? The business owner, broker and/or franchisor will ask for a PFS as evidence that you’re financially able to purchase the business or franchise.

If you plan to rent a commercial office, retail space, or other types of business space, the landlord will likely request a personal financial statement before approving your lease.

As you can see, there are numerous reasons you need a PFS. It’s smart to prepare yours now (and keep it updated) so it will be ready when needed.

Personal financial statements are financial snapshots offering numerous benefits.

Beyond simply tracking your assets and liabilities, a PFS offers several vital benefits for entrepreneurs. Creating your PFS is like getting a checkup, except the result is a fiscal health evaluation rather than a physical one.

Some of the benefits of preparing a personal financial statement (sometimes called a personal financial summary):

•   Securing funding: As we already noted, when seeking loans for business expansion, new equipment or company vehicles, lenders rely on your PFS to assess your creditworthiness and ability to repay. A strong PFS significantly increases your chances of securing favorable loan terms and interest rates.
• Understanding your net worth: Your PFS provides a clear picture of your overall financial standing, including your assets (cash, investments, property) and liabilities (debt, loans, mortgages). Seeing a comprehensive view helps you make informed decisions about investments, savings goals and risk management.
• Making prudent financial decisions: With a clear understanding of your income, expenses and debt obligations, you can make informed choices about spending, investments and financial planning. Your PFS empowers you to avoid impulsive decisions and build a solid financial foundation.
• Monitoring progress and adapting: Regularly reviewing your PFS allows you to track your progress toward your financial goals and identify areas for improvement. This ongoing review process enables you to pivot, adapt, and adjust your strategies as your business and personal circumstances evolve.

What's included in a personal financial statement?

A typical PFS is divided into two main sections—assets and liabilities.

List of assets

• Current Assets include cash, checking and savings accounts, certificates of deposit, short-term investments and accounts receivable.
• Investment Assets include stocks, bonds, mutual funds and retirement accounts (IRAs, 401(k)s).
• Fixed Assets include real estate holdings and personal property, such as jewelry, cars and other items of significant value (art collection, first editions of books, etc.)

List of liabilities

• Current Liabilities include credit card debt, outstanding bills and short-term loans.
• Long-term Liabilities include mortgages, car loans, student loans and personal loans.

Do not include business assets or liabilities in your personal financial statement.

Creating your financial snapshot

You don’t need to be a financial wizard to create a PFS. Here’s how:

• Gather your documents: Collect bank statements, investment account statements, loan documents and receipts for major purchases.
• Choose a format: You can use an online template, spreadsheet or pen and paper. Choose the best format for you and ensure consistency for future updates.
• List your assets: Identify and value all your assets using current market values for investments and real estate.
• List your liabilities: Include all your debts, noting the remaining balances and interest rates.
• Calculate your net worth: Subtract your total liabilities from your assets to determine your net worth. While this is part of your overall personal balance sheet, you should keep this calculation as a separate net worth statement.
• Review and update regularly: Your PFS is not static. Update it regularly, ideally quarterly, to reflect changes in your financial situation.

When creating your personal financial statement, it’s critical to be honest and accurate. This wealth assessment is for your own benefit to help you (and lenders) make informed decisions. No one is judging you.

A PFS helps you take ownership of your personal finances and equips you with the knowledge and confidence to navigate the challenges and reap the rewards of entrepreneurship. A healthy business rests on a solid personal financial foundation.

If navigating financial statements feels overwhelming, consider consulting with a financial advisor, accountant or SCORE mentor .

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• Statement of Financial Position

Home › Accounting › Financial Statements › Statement of Financial Position

• What is the Statement of Financial Position?

Assets Section

Liabilities section, equity section, does the balance sheet always balance.

The statement of financial position, often called the  balance sheet , is a financial statement that reports the assets, liabilities, and equity of a company on a given date. In other words, it lists the resources, obligations, and ownership details of a company on a specific day. You can think of this like a snapshot of what the company looked like at a certain time in history.

This definition is true in the sense that this statement is a historical report. It only shows the items that were present on the day of the report. This is in contrast with other financial reports like the income statement that presents company activities over a period of time. The statement of financial position only records the company account information on the last day of an accounting period.

In this sense, investors and creditors can go back in time to see what the financial position of a company was on a given date by looking at the balance sheet.

Let’s take a look at a statement of financial position example.

As you can see from our example template, each balance sheet account is listed in the accounting equation order. This organization gives investors and creditors a clean and easy view of the company’s resources, debts, and economic position that can be used for  financial analysis purposes .

Investors use this information to compare the company’s current performance with past performance to gauge the growth and health of the business. They also compare this information with other companies’ reports to decide where the opportune place is to invest their money.

Creditors, on the other hand, are not typically concerned with comparing companies in the sense of investment decision-making. They are more concerned with the health of a business and the company’s ability to pay its loan payments. Analyzing the leverage ratios, debt levels, and overall risk of the company gives creditors a good understanding of the risk involving in loaning a company money.

Obviously, internal management also uses the financial position statement to track and improve operations over time.

Now that we know what the purpose of this financial statement is, let’s analyze how this report is formatted in a little more detail.

The statement of financial position is formatted like the  accounting equation  (assets = liabilities + owner’s equity). Thus, the assets are always listed first.

Assets are resources that the company can use to create goods or provide services and generate revenues. There are many ways to format the assets section, but the most common size balance sheet divides the assets into two sub-categories: current and non-current. The current assets include cash, accounts receivable, and inventory. These resources are typically consumed in the current period or within the next 12 months.

The non-current assets section includes resources with useful lives of more than 12 months. In other words, these assets last longer than one year and can be used to benefit the company beyond the current period. The most common non-current assets include property, plant, and equipment.

Liabilities are debt obligations that the company owes other companies, individuals, or institutions. These range from commercial loans, personal loans, or mortgages. This section is typically split into two main sub-categories to show the difference between obligations that are due in the next 12 months, current liabilities, and obligations that mature in future years, long-term liabilities.

Current debt usually includes accounts payable and accrued expenses. Both of these types of debts typically become due in less than 12 months. The long-term section includes all other debts that mature more than a year into the future like mortgages and long-term notes.

Equity consists of the ownership of the company. In other words, this measures their stake in the company and how much the shareholders or partners actually own. This section is displayed slightly different depending on the type of entity. For example a corporation would list the common stock, preferred stock, additional paid-in capital, treasury stock, and retained earnings. Meanwhile, a partnership would simply list the members’ capital account balances including the current earnings, contributions, and distributions.

In the world of nonprofit accounting, this section of the statement of financial position is called the net assets section because it shows the assets that the organization actually owns after all the debts have been paid off. It’s easier to understand this concept by going back to an accounting equation example. If we rearrange the accounting equation to state equity = assets – liabilities, we can see that the equity of a non-profit is equal to the assets less any outstanding liabilities.

Notice that the balance sheet is always in balance. Just like the accounting equation, the assets must always equal the sum of the liabilities and owner’s equity. This makes sense when you think about it because the company has only three ways of acquiring new assets.

It can use an asset to purchase and a new one (spend cash for something else). It can also take out a loan for a new purchase (take out a mortgage to purchase a building). Lastly, it can take money from the owners for a purchase (sell stock to raise cash for an expansion). All three of these business events follow the accounting equation and the  double entry accounting system  where both sides of the equation are always in balance.

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Personal Financial Statement Template

This personal financial statement template is a great tool to keep track of your personal assets, liabilities, income, and expenses.

This is what the personal financial statement template looks like:

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A personal financial statement is a document or set of documents that outline an individual’s financial position at a given point in time. It is usually composed of two sections – a balance sheet section and an income flow section. Although an individual can use more complex personal financial statements, this article will focus on a simple version. The format outlined in this article is a good starting point for individuals who are new to using personal financial statements to record their personal finances.

Why use a Personal Financial Statement?

A personal financial statement can be a very valuable tool in planning out one’s finances. It is usually goal-oriented and can help an individual reach his or her financial goals, especially for young professionals entering the workforce for the first time. Most of these people are new to financial planning and a simple personal financial statement is an easy place to start.

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A well rounded financial analyst possesses all of the above skills!

Additional Questions & Answers

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In order to become a great financial analyst, here are some more  questions and answers  for you to discover:

• What is Financial Modeling?
• How Do You Build a DCF Model?
• What is Sensitivity Analysis?
• How Do You Value a Business?

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Understanding Your Financial Position

Updated on September 4, 2023

Hey money-savvy folks!

Are you thinking of getting your financial ducks in a row with a clear financial position?

Whether you’re an individual or a business owner, we know that managing our finances is as important as getting our daily dose of caffeine. 

Imagine this:

You’re sitting on your porch, enjoying a cuppa, and suddenly, a wave of financial confidence washes over you. You are fully aware of your financial situation, how to make your hard-earned money work for you, and how to handle any unforeseen financial setbacks.

Sounds like an impossible dream?

Well, it’s time to understand your financial position, so you can wave goodbye to money stress and say hello to financial peace of mind.

In this article, we will explore the definition of financial position and how to identify and analyse your own financial position.

Jump straight to…

Financial Position Definition

Current assets, current liabilities, current debt, what is a financial position statement, what is a healthy financial position, how can i improve my financial position, need to get your money sorted find the right finance expert who can guide you by booking a free 15 min call or send us your questions.

Alright, let’s break it down. 

Your financial position is like your personal financial GPS . It tells you where you’re at and where you’re headed. Whether you’re a paycheck-to-paycheck warrior or a business tycoon, understanding your financial position is crucial to rock your money goals and avoid any financial detours.

Your financial position refers to the overall health of your finances . Your assets, liabilities, and obligations are all included in this picture of your present financial condition. You can evaluate your capacity to fulfil financial responsibilities and reach your financial objectives by being aware of your financial health.

Identifying Your Financial Position

So, How Do You Figure Out Your Financial Position?

First things first, let’s unravel the mysteries of your financial position. It’s like putting together the pieces of a jigsaw puzzle, but don’t worry, it’s easier than it sounds. 

Here are the key factors to consider :

Think of cash flow as the lifeblood of your financial existence. It’s all about tracking the money flowing in and out of your accounts to make sure that cash flows. 

Are you swimming in a sea of cash or barely keeping your head above water?  

Positive cash flow means you have more money coming in than going out of your accounts, while negative cash flow indicates the opposite.

By keeping an eye on your cash flow, you can spot areas where you can reduce expenses, make more money, or set aside funds to achieve your financial goals.

Current assets are your financial superheroes that can be quickly transformed into cash within a year. They include things like cash on hand (yep, that cash in your wallet), savings , investments , and even that money your friend borrowed but hasn’t paid back yet (aka accounts receivable ). Calculating your current assets gives you the inside scoop on the money you have at your fingertips (or what is referred to as liquidity ).

Now, let’s talk about the financial monsters lurking in the shadows: 

Current liabilities . 

These are the debts or bills that you need to pay within a year . They could be sneaky credit card bills, utility payments, or those buy-now-pay-later accounts. Knowing your current liabilities helps you stay on top of your financial obligations and understand the urgency of debt repayments so you can tackle them head-on.

Ah, debt. The dirty D-word that no one likes to talk about. But hey, we’re all about facing our financial fears here. 

Current debt specifically refers to the portion of your total debt that needs to be paid within a year . It could be that lingering credit card balance, in-store financing, or that personal loan you’ve been itching to get rid of. By understanding your current debt, you can start strategising your repayment plan and show debt who’s boss by making informed decisions about managing your debt obligations.

Think of this as your financial superhero cape. Your financial position statement, also known as a balance sheet , is a document that reveals your financial prowess at a specific point in time by showing a summary of your financial position. 

It showcases your assets, liabilities, and equity . This handy tool helps you calculate your net worth , which is the difference between what you own and what you owe. It’s a valuable tool for monitoring your financial progress over time.

A healthy financial position is like having a solid foundation for your financial house. It means being in a stable and secure state where you have control over your finances and can handle unexpected expenses without breaking a sweat. 

Here are a few key indicators of a healthy financial position:

1. Positive Cash Flow

Having a positive cash flow means that you’re earning more money than you’re spending. It enables you to pay your bills, put money away for the future, and even invest in opportunities to increase your wealth.

2. Low Debt-to-Income Ratio

Your debt-to-income ratio is a measure of how much debt you have compared to your income. A healthy financial position usually means having a low debt-to-income ratio that won’t give you nightmares. You’re not drowning in debt; you’re in control and making progress towards being debt-free.

3. Emergency Fund

An emergency fund is like your secret weapon. It’s a stash of money set aside for unexpected expenses like medical bills or car repairs. A healthy financial position includes having an emergency fund that can cover at least three to six months’ worth of living expenses.

4. Savings and Investments

A healthy financial position means you’re not just living paycheck to paycheck. You’re building up savings and investments , like a true money master. You’re setting aside money for your future goals, whether it’s a dream holiday, a house deposit, an education fund for your children, or a comfortable retirement .

Improving your financial position is like giving your financial health a boost. It may take time and effort, but the rewards are well worth it. 

If you’re keen to take your financial position from good to great, here’s what you can do :

1. Track Your Expenses: Know Where Your Money Goes 

Start by tracking your spending like a hawk. Get a handle on where your hard-earned cash is going and identify areas where you can cut back. Look for any unnecessary spending and find ways to reduce expenses without sacrificing your quality of life. Those daily lattes? Maybe it’s time to bring the coffee machine out from the back of the kitchen cupboard and pocket the savings.

2. Create a Budget 

Creating a budget is your ticket to financial success. It’s like choreographing your money moves. Allocate your income to different categories, like bills, savings , and splurges. Stick to your budget and watch your financial position improve. 

3. Reduce Debt

Say goodbye to debt like a boss. Focus on paying off your high-interest debts first while making minimum payments on the rest. Look into strategies like debt consolidation or negotiating better interest rates. You’ve got this!

4. Hustle for Extra Income

It’s time to unleash your inner hustler. Look for opportunities to boost your earnings, such as taking on a side gig, freelancing, or investing in your skills to advance in your career. The extra income can help you pay off debt faster and save more for the future.

5. Build an Emergency Fund and Give It Some Love

Build up that emergency fund like it’s your financial BFF. Set aside a portion of your income each month until you’ve got a buffer of three to six months’ worth of living expenses. Having this buffer will provide peace of mind and protect you from financial shocks.

6. Invest Wisely

Once you’ve built a solid financial foundation, it’s time to put your money to work and watch it grow. But hold your horses, we’re not talking about throwing your hard-earned cash at every shiny investment that comes your way. We’re talking about investing wisely. 

You can dip your toes into the stock market , dabble in bonds , or even take a leap into real estate . The key is to create a diversified portfolio of investments that align with your risk tolerance and financial goals. Do your research, seek advice if needed, and make informed decisions that suit your unique circumstances.

Remember, improving your financial position takes time and dedication. It’s not an overnight fix, but a journey towards financial freedom. Stay disciplined, stay focused, and keep making smart financial choices. Start small, invest wisely, and watch your wealth grow.

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• Personal Financial Statement

40+ Personal Financial Statement Templates & Forms

Engineers, doctors , surgeons, architects, marketers etc. are all great and reputable professionals but you will often find some of them drowning in debt or engulfed in other financial problems. This is mainly because their academic discipline has prepared them to perform a certain task impeccably but hasn’t prepared them to effectively manage their finances. If you dream to live your life without facing any financial difficulties then rather wasting your time sitting in the pews of church and day dreaming about financial paradise, you should hustle up start taking some actions. The first and the foremost thing you should do is to educate yourself about the basics of personal finance, so that at least you can calculate your own financial position and can then plan to improve it.

Table of Contents

• 1 Personal Financial Statement Templates
• 2 What Exactly is a Personal Financial Statement?
• 3 Personal Financial Statement Forms
• 4 Uses of a Personal Financial Statement
• 5 Personal Financial Statement Samples
• 6.2 Liabilities
• 7.1 Annual Income and Expenses

When it comes to planning one’s life, most professionals find themselves uneducated about finance in order to make astute financial decisions for their future. This is where finance professionals, who know how the money works, have an unfair advantage. But the subject of money management and personal finance can easily be learnt by anyone.

We don’t mean that you need to become some finance geek in order to make good personal financial decisions, but at least you should know the basics of personal finance in order to avoid falling prey to greedy bankers who use complex terminologies that represents a very simple idea.

Personal Financial Statement Templates

Knowledge of personal finance equips and enables a person to not only face financial difficulties with courage but also solve them prudently. Having a basic knowledge of personal finance will make you feel more confident as you will be the one controlling and in charge of your own finances and not dependent on someone else.

Well, you may be thinking that if the education of personal finance is so important then why it isn’t taught in schools? That’s a great question pal, but unfortunately education planners of our country believe that there are many other important topics that should be taught in schools that’s why education of personal finance is neglected. Thus, whatever a child learns about personal finance and money, he learns from his home, and since most parents themselves are ignorant about the topic of money management and personal finance, this makes their children ignorant about this important subject too. This isn’t some hypothetical situation, it’s the reality of our country.

What Exactly is a Personal Financial Statement?

You may have heard about the term financial statements previously and you may have an idea that it is some sort of statements that lists down random numbers that are said to depict the financial standing of the company. Well, financial statements are not only for the companies, an individual can also have his/her own financial statements that are referred to as ‘Personal Financial Statements’. They are mainly used when a person is planning to apply for a loan .

This document gives a holistic view to the credit officers of a bank or any lending institution about a person’s financial muscle so that the banker can make an informed decision about what should be the credit limit of a particular person. The most common sections in any personal financial statement template include information related to total assets and total liabilities.

Personal Financial Statement Forms

Uses of a Personal Financial Statement

Well, now you know what a personal financial statement is, it’s time to reveal some of its most common uses.

• It is used when applying for a loan
• It is used for effective financial planning
• It is used to determine the amount that you should save

When Applying for a Loan

You’d be fooling yourself if you believe that you will never need a loan. Your credit card in your wallet is a devise through which you will always remain balls deep in debt. Apart from this if you ever plan to attend a college you will need a loan or if you ever decide to start your own small business then you would be required to borrow money in order to guarantee smooth day to day operations of your business . For all this, Mr. Banker will require you to submit your own personal financial statement. After vetting this personal financial statement, the credit officer in a bank or any lending institutions will determine how much credit facility should be extended to your small business.

For Financial Planning

Financial planning is the difference between a penurious and a well off person. If you know nothing about your current financial situation or your net worth then it’s time that you set everything else aside and visit our website and download a personal financial statement’s template through which you can easily calculate your net worth. No need to be terrified, horrified and petrified if you find your net worth is in negative numbers, rather you should start taking steps to reduce your liabilities and increase your income generating assets. But remember, all this will start with correctly filling out a personal financial statement form.

For Saving Purpose

If you are not maintaining and updating your personal financial statement then we would like to inform you that it’s a perfect recipe for a failure because you will likely not be able to save money for the future. A personal financial statement will allow you to pay yourself first i.e. set money aside for your savings before you pay your bills or spend it carelessly. You will be well informed of the expenses and the uncovered liabilities and thus will be in a position to reduce it, so that you can save more. Remember, the money that you save and invest today will compound in the future.

Personal Financial Statement Samples

Elements of a Personal Financial Statement Template

Rather than beginning from scratch for drafting your personal financial statement you can download a personal financial statement template from our website and can then enter all the numbers required after which you will be able to see your net worth at a particular point in time. Before you begin to use a particular template it is important that you know what sections a good personal financial statement template, one that give a true and fair view of a person’s financial standing, should have. Following are the four major sections that you will find in almost all personal financial statement templates.

Liabilities

• Annual Income

Every good personal financial statement will first list down all the assets that an individual possesses. You may be thinking that it’s too obvious, but it’s not. If we ask you what your most valuable asset is, what would you say? Well most household in US believe that their home is their most valuable asset that they have purchased. If that’s your answer too then you have no idea what asset means.

An asset is something that puts money into your pocket periodically and your home, according to this definition is not your asset because your home takes money out of your pocket through bills, taxes, renovation etc.

Items included in the asset column of your personal financial statement include cash that you have in the locker of your house and your bank balance. Also, the cash value of your investments in stocks, bonds or any other investment vehicle will also be recorded in the asset column of your personal financial statement.

If you own a property for investment purposes like for renting it out then you can also record the cash flow generated from such investments in the asset column of your personal financial statement. Also, other assets that are liquid and can be converted to cash readily can also be listed in the asset column of your asset.

In some personal financial statement templates you will see that there is a distinction between current and non-current assets. This distinction is not very important for you as a person. However, for the sake of your information, current assets are those that are liquid and can be converted to cash in a short period of time, while non-current assets are illiquid assets that do not have a vibrant and robust secondary market and therefore needs a large amount of time (weeks or sometimes even months) to be sold. A real estate is a perfect example of non-current asset. Now let’s move on to discuss the next section of a good personal financial statement template.

A liability is the amount of money that you have to pay i.e. the money that you owe . In this section you will list down all the sources to whom you owe money and also the amount that you owe. Loan taken out from a bank, taxes due, mortgage payments due and any other debts will be listed in the liability column of your personal financial statement. If you can’t remember your creditors then it’s better to use a personal financial statement template that already has some basic and obvious creditors listed in the template.

If you are living in a rented house then the monthly rent payments that you make is your liability that you have to pay, come what may. If you do not honor/settle your liabilities on time then it will adversely affect your credit rating. Nobody wants that.

Just as in the case of assets, liabilities too are divided into current and non-current liabilities. A current liability is the one that you have to settle within the time period of one year (short term) while non-current liabilities are ones that are due after one year (long term).

These numbers listed in your personal financial statement are used to calculate your net worth. It is done by first calculating your total assets and total liabilities and then subtracting your liabilities from your assets, in other words, you have to subtract the amount that you owe from the amount that you own. The figure calculated by this formula will give you your net worth. If it’s positive, congratulations on your good financial standing, however, if it’s negative then you got lot to look forward to.

Items present in the liability column of your personal financial statement are your insurance premiums, credit card bills, federal taxes, your upcoming mortgage payments , and/or any loan extended to you by the bank.

Personal Financial Statement Examples

Annual Income and Expenses

Apart from the assets that you own and the liability that you have to pay, a good personal financial statement will also factor in the annual income that you generate. Under this section, your take home salary, dividend income, rental income or any income generated from other sources will be mentioned.

Also the expenses that suck your income will be mentioned. These expenses will include the money that you spend on the purchase of household items. Also, you will find a section of contingent liabilities in a good personal financial statement template. Under this section you will mention the amount of money that you believe will be required to pay in case any unforeseen event happens. Examples include a surprise audit by IRS, a penalty awarded by the court in a law suit, damage to your property due to bad weather etc.

As evident from the above article that an education of personal finance is imperative especially in today’s era of high uncertainty in order to equip individuals to take control of their own finances. Personal financial statement template is a basic tool that will allow any individual to visualize his financial standing so that he can effectively plan for the future and his/her financial goals.

If you too believe that having a personal financial statement is essential then wait no more and click here to visit our website. On our website you will find dozens of personal financial statements template that you can download for free and chose the one that you are comfortable working with. We have a template of personal financial statements in excel as well as PDF format.

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WTO / Business / Statements / Free Financial Statement Templates (Excel)

Free Financial Statement Templates (Excel)

Managing personal finances is an essential aspect of financial wellness. Whether you are planning for your future, tracking your progress toward financial goals, or applying for a loan or mortgage, having a clear understanding of your financial standing is crucial. One powerful tool that can help you gain insight into your financial health is a personal financial statement.

It is a snapshot of your financial situation, providing an overview of your assets, liabilities, and net worth. It is a valuable document that can help you assess your current financial status, plan for the future, and make informed financial decisions.

In this comprehensive guide, we will explain the process of creating a personal financial statement, providing practical tips and insights along the way. Whether you are a beginner or have some experience with personal finance, this guide will equip you with the knowledge and tools to create an accurate and comprehensive statement that can serve as a foundation for your financial success.

Free Templates

Personal Financial Statement 

A personal financial statement is a document that provides a snapshot of an individual’s financial position at a given point in time.

It typically includes information on an individual’s assets, liabilities, and net worth. Assets are items or properties owned by the individual, such as cash, investments, real estate , and personal property . Liabilities are debts or obligations owed by the individual, such as loans, mortgages, credit card debt, and other outstanding debts.

Net worth is the difference between an individual’s total assets and total liabilities, representing their overall financial position.

It can be used for various purposes, such as financial planning, loan applications, mortgage applications, evaluating investment opportunities, and tracking progress toward financial goals. It provides a comprehensive overview of an individual’s financial situation, helping them assess their financial health, make informed financial decisions, and plan for their financial future.

They are typically prepared using a standard template or spreadsheet, and they may also include information on an individual’s income, expenses, and financial goals, depending on the purpose and scope of the statement .

Accuracy and honesty are essential when preparing the statement, as it serves as a key tool for assessing one’s financial situation and making financial decisions based on reliable information.

Corporate VS Personal Financial Statement

A personal financial statement is a document that provides an overview of an individual’s financial situation, including their assets, liabilities, and net worth. It is different from a corporate statement in terms of scope, reporting standards, size, complexity, legal requirements, and purpose.

While corporate financial statements are regulated by accounting standards and required for legal compliance, personal financial statements are typically simpler and used for personal financial planning and loan applications.

When is this Document Required?

A personal financial statement may be needed in various situations, including:

• Loan applications: Lenders may require this statement as part of the loan application process to assess an individual’s creditworthiness and ability to repay the loan.
• Financial planning: They are useful tools for individuals to assess their current financial situation, set financial goals, and create a budget and financial plan.
• Investment or retirement planning: They can help individuals determine their current net worth and make informed decisions about investments, retirement savings, and other long-term financial goals.
• Tax planning: They may be used for tax planning purposes, such as estimating tax liabilities, evaluating tax deductions, and planning for potential tax liabilities.
• Divorce proceedings: In divorce cases, the statements may be required to determine the division of assets and liabilities, alimony, and child support.
• Estate planning: Financial information can be useful in estate planning to determine an individual’s net worth, assess potential estate taxes, and plan for the distribution of assets to beneficiaries.
• Financial management: Information about finances can be used for day-to-day money management, including tracking income, expenses , and net worth, and making informed financial decisions.

Components of Personal Financial Statement

There are three components of this statement. It is essential to include these details when creating an accurate document.

The three essential components are mentioned below:

Personal information

You should include your legal name in full, your address, and your contact information, such as your phone number and email address. The personal information section is important for verification purposes. 

Balance sheet

The other element of the statement is the balance sheet, also known as the statement of financial position. The balance sheet focuses on your assets and liabilities to determine your net worth.

This section lists all of an individual’s assets, including cash, savings and checking accounts, investments ( such as stocks, bonds, and real estate ), retirement accounts, vehicles, valuable personal property ( such as jewelry, artwork, and collectibles ), and other assets.

Assets are typically listed at their current value or estimated value. An individual’s liabilities or debts include mortgages, car loans, student loans, credit card debts, personal loans, and other debts. Liabilities are typically listed with the outstanding balance or amount owed for each liability.

Income statement

In the context of the statement, an income statement (also known as a statement of income or statement of operations) typically provides an overview of an individual’s income and expenses over a specified period. It typically summarizes the individual’s sources of income, such as salary, investments, rental income, and other earnings, and deducts expenses, such as living expenses, taxes, debt payments, and other expenses, to arrive at the individual’s net income or loss for the period.

It is important to note that the specific components of a personal financial statement may vary depending on the individual’s financial situation, the purpose of the financial statement, and any applicable legal or regulatory requirements.

Guide to Preparing a Personal Financial Statement: Steps and Considerations

Apart from using a template, you can also choose to prepare the statement yourself if you don’t want to use a personal financial statement template.

With the following steps, you will be able to prepare a proper and practical statement: 

Choose a format

Decide on the format for the statement. You can use spreadsheet software like Microsoft Excel or Google Sheets, or you can create a document using word processing software like Microsoft Word or Google Docs. 

State your assets and their worth

The next step is to list all your assets. You should also include their monetary value next to each asset. You cannot include a rental house or a leased car in the assets section. List all of your assets, including cash, savings accounts, investments, real estate, vehicles, and any other valuable possessions that you own. Be sure to include the estimated worth or market value of each asset.

State your liabilities and their worth

Create a section for your liabilities. List all of your debts and obligations, including mortgages, loans, credit card balances, and any other outstanding debts or liabilities that you owe. Include the current balance or amount owed for each liability.

Calculate total assets and liabilities

Calculate the total of your assets by adding the estimated worth or market value of all your assets listed in the assets section. Similarly, calculate the total of your liabilities by adding the current balances or amounts owed for all your liabilities listed in the liabilities section.

Calculate your net worth

You can now calculate your net worth by subtracting the total of your liabilities from your total assets. Again, ensure this information is included in a separate cell for easier readability. 

Review and update

Review your statement periodically and update it as needed. It is important to keep your financial records current to reflect any changes in your financial situation, such as changes in assets, liabilities, or net worth.

Accuracy and honesty

Ensure that your statement contains accurate and honest information. It may be used by financial institutions, tax authorities, or other legal entities to assess your financial standing, so it is crucial to provide truthful and reliable financial details.

Including an income statement in your financial statement is optional and may not be necessary for everyone. It depends on your financial situation and goals. Seeking professional advice may be beneficial.

The steps to follow are mentioned below to make it easy for you:

Step 1: Include an income statement

• Create a section for your income statement in your chosen format.
• List your sources of income and expenses for a specific period.
• Include your total income and expenses.

Step 2: Calculate net income

• Subtract your total expenses from your total income to calculate your net income.
• Net income represents the amount of money left over after deducting expenses from income.

Step 3: Include net income in financial statement

• If you choose to include an income statement, you can list your net income under the income section of your statement.
• You can also include it in the total assets or net worth calculation, depending on your desired presentation.

Frequently Asked Questions

It is a legal document and should contain accurate and honest information. However, it may not carry the same legal weight as corporate financial statements. It is important to understand that providing false or misleading information on a personal financial statement can have legal consequences..

It is a good practice to review and update your financial documents at least once a year or whenever there are significant changes in your financial situation, such as changes in income, expenses, assets, or liabilities. Regular updates can help you track your financial progress, set new financial goals, and make informed financial decisions.

If you have more liabilities than assets, i.e., a negative net worth, you will need to revisit your goals and manage your finances better. Avoid attempting to manipulate the data to create a positive net worth on paper to obtain the desired financing. This is a crime that can lead to huge fines and even imprisonment. Instead, find ways to actually improve your net worth.

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Statement of financial position

How to use afca’s statement of financial position.

Completing a Statement of Financial Position is an important step in helping you to talk with your financial firm and AFCA about your current financial position. This is different to a Statement of Financial Circumstances, which is completed by dependants of a deceased superannuation fund member to show an interdependency relationship.

A Statement of Financial Position is a secure online form that you can complete, which records key information on your current financial situation and how you propose to repay your debts. The form generally takes 10–15 minutes to complete.

You only need to enter your financial information and the electronic form will do the calculations for you. The form will also step you through a series of options to help you work out what kind of help you might need.

You need to know:

• what you earn
• what you owe
• what your living expenses are
• what you own.

When you complete the electronic form, save the final form (which will be a PDF document) on your computer or device.

You can then provide the completed form to your financial firm or anyone else who is helping you, such as a financial counsellor.

If you make a complaint to AFCA, we will ask you for a copy.

Open the online Statement of Financial Position

You can also download  PDF  or Microsoft  Word  versions of the Statement of Financial position

Related information

• Financial hardship
• Authorised agents
• Other places to get help

1800 931 678 (free call)

1300 56 55 62 (members).

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AFCA chat service terms and conditions

Welcome to our live chat help service.

Please be advised we cannot provide you with financial or legal advice. However, we may be able to refer you to a community legal centre or financial counselling service if you need help.

Our live chat is operated by Genesys Cloud on behalf of AFCA. Any personal information provided in this chat will be captured by both organisations in accordance with their privacy policies, available at www.afca.org.au/privacy and www.genesys.com/company/legal/privacy-policy

We provide consumers and small businesses with fair, free and independent dispute resolution for financial complaints.

Please enter your details to start your chat with an AFCA representative.

Department of Finance

Select Section

PhD personal statement and resume

You should prepare your personal statement in advance to be uploaded into the online application via the application tab titled “Supplemental.” In review of your personal statement, the admissions committee will seek evidence of your maturity, leadership, strength of purpose, academic potential and ability to communicate clearly and professionally. Please be concise, yet thorough.

The statement should be no more than two to four pages long. Ensure the document file is not password protected and is in .doc, .pdf or .txt format. Please note that special fonts and/or formats (italics, bold, etc.) may be lost during submission. Be sure to carefully proofread your statement prior to submission.

Distinguish yourself

Submission of the personal statement allows you an opportunity to highlight the qualities and experiences that distinguish you as a prospective W. P. Carey doctoral student. Applicants are requested to provide information pertaining to the following areas as part of their statement:

• Your name as it will appear on the ASU Graduate College application
• The ASU Application Reference Number assigned to you upon submission of your online application and/or your 10-digit ASU Identification Number
• Your personal background, including formative events and circumstances such as extracurricular activities, honors, achievements and community activities
• Work experience, including credentials you have from your hands-on and professional experiences
• Descriptions of the research projects you have conducted and your personal research interests
• Other personal attributes and qualities
• Qualifications and reasons for interest in the W. P. Carey PhD in business administration with a specialization in finance
• How obtaining a PhD will help you achieve your personal career goals and objectives

Employment summary/resume

You should prepare your resume information in advance to be uploaded into the online application via the application tab titled “Additional Info.” Ensure the document file is not password protected and is in .doc, pdf or .txt format. Please note that special fonts and/or formats (italics, bold, etc.) may be lost during submission. Be sure to carefully proofread your statement prior to submission.

Resumes should include:

• Job titles and positions held, key responsibilities and accomplishments for each position, and salary history (optional)
• Honors, awards, certificates, professional organizations, volunteer activities and community involvement
• Computer skills, multilingual abilities and overseas travel or work experience
• Academic background, including schools attended and degrees earned

Answers to additional questions

You should be prepared with responses that describe what qualifies you to meet the W. P. Carey School of Business expectation that all new students have proficiency in using a computer spreadsheet, programming and college-level business calculus / statistics. Responses of 255 characters or less are required regarding two categories, (1) Computer Competency and (2) Calculus / Statistical Competency, and should include class number, course titles, grades, institution name, etc.

A Guide to Your Credit Card Statement

Many people overlook their credit card statements. Here's why you shouldn't.

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Checking your credit card statement every month is an important financial task. The statement holds key information about your card’s balance, interest rate and payment due date. 

Plus, by monitoring transactions, you can get a sense of where your money is going — and detect any fraudulent purchases quickly. Here’s how to read the fine print. 

Account summary

The account summary shows activity during the most recent billing period. At the top, you’ll see the balance from the end of your card’s previous billing cycle, which may be called the previous balance. Then you’ll see the amount you made in payments, which is subtracted from the previous balance. 

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The account summary also includes the total amount of purchases and credits (for example, refunds for items you returned to a merchant), balance transfers, cash advances, any past due amount, fees charged, and interest that has accrued since the last billing cycle. Additionally, you’ll see the starting and closing dates of the billing cycle, which usually lasts 28 to 31 days. Transactions occurring after the closing date will show up on your next bill. 

Your statement balance (which may be called the new balance) shows the amount you owe at the end of the billing cycle. Your credit limit, as well as the amount of credit available to you after subtracting your card’s balance, appears in the account summary, too. 

Payment information

Perhaps the most important line in this section is your payment due date. Your payment is usually considered to be on time if you submit it by 5 p.m. in your time zone on the due date shown, if it’s a weekday; if the due date falls on a weekend or holiday, then you have until the next weekday to pay your balance. 

If you send your credit card payment by mail, try to mail it well before the due date so you won’t incur late fees. Your credit card bill provides a payment coupon to include with your check or money order.

The payment section also lists the minimum payment due, which is the amount required to avoid a penalty, as well as a warning that explains how much you’ll owe in fees and higher interest if you fail to pay by the due date. In addition, this section explains the number of months or years it will take to pay off the balance if you make only minimum payments. By paying your balance on time and in full every month, you can avoid a lengthy repayment time, interest charges and late fees. 

Changes to your account

If your account terms change, those differences are listed here. For example, if your card company increases your interest rate or adds more fees, you’ll be informed in this section and given at least 45 days’ notice before the changes take effect. If you trigger a penalty interest rate by paying late or exceeding your credit limit, you’ll see the rate increase here.

Transactions

This section provides a summary of your purchases and other transactions since your last statement, showing exactly where your money is going, says Ted Rossman , senior industry analyst at Bankrate. Every purchase you made is listed, along with the date of the purchase and identity of the merchant. 

Inspect this part of your statement closely for any unfamiliar or forgotten charges, such as free-trial subscriptions that turned into paid services after the trial ended, Rossman says. You should also scrutinize the list for transactions you don’t recognize, which could indicate fraud. If you see a purchase you don’t recall making, contact the merchant first. If you can’t resolve the issue with the merchant, write a letter to your credit card company to dispute the charge. 

Under the Fair Credit Billing Act, you have 60 days after the date the billing statement was sent to you to dispute an erroneous charge. Your credit card provider must investigate and resolve the dispute within two complete billing cycles — but no more than 90 days — of receiving the letter. 

If the card provider determines that the charges were unauthorized, the law limits your liability to $50, no matter how much was charged to your card. Many card companies offer zero-liability protection as long as you notify them of suspected fraud within 30 days of receiving your statement and noticing the error. 

Fees and interest charges

This section tells you the total amount you’ve been charged in interest and fees for the current year. If you’ve been paying fees, look for ways to avoid them, Rossman says. For example, setting up automatic payments of your credit card bill will ensure that your payments arrive on time.

Keep in mind that you can ask your card provider to lower your interest rate or waive fees, too. A recent survey by LendingTree found that three-fourths of consumers who requested a lower interest rate on one of their credit cards in the past year were successful.

Interest charge calculations

At the bottom of your credit card statement, you’ll see how interest on your payments is calculated. This section includes the annual percentage rate (APR) for purchases, balance transfers and cash advances. 

It also details the balances subject to the current APR and any changes in your interest rate. For example, if you had an introductory purchase APR of 0%, you’ll see when that rate will expire. 

Credit card rewards

If you have a rewards credit card , this section shows the amount of cash back, points or miles you’ve earned and redeemed. This is useful if you’re planning to use your rewards to take a trip or pay for another big expense. 

How long to keep your credit card statement

Jim Droske, owner of Illinois Credit Services , a credit-repair company, says it’s important to have access to your credit card statements in case you want to dispute a fraudulent charge or need them for tax documentation. 

If you receive paper statements, store them in a safe place for at least 60 days to dispute a fraudulent charge or for up to six years if you need them for your taxes. If you manage your account online, consider downloading electronic copies of your statements to a password-protected file on your computer.

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here .

Related Content

• Why You Should Keep Your Credit Cards Active
• What Is a Good Credit Score?
• How Do Credit Cards Work? Interest and Fees Explained

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Ella Vincent is a personal finance writer who has written about credit, retirement, and employment issues. She has previously written for Motley Fool and Yahoo Finance. She enjoys going to concerts in her native Chicago and watching basketball.

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More From Forbes

20 vital strategies for accurate and reliable company financial statements.

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Business decisions are often driven by data, so the accuracy and reliability of financial statements are paramount. One misstep in financial reporting can have far-reaching consequences, eroding investor trust, inviting regulatory scrutiny and damaging a company's reputation. To avoid these pitfalls, businesses should establish foolproof strategies that ensure their financial statements are not only accurate but also reliable.

Below, 20 Forbes Finance Council members share indispensable strategies that can significantly bolster the credibility of your company's financial reports, safeguarding both your bottom line and your reputation in the process. Whether you're a seasoned CFO or a budding entrepreneur, these insights will prove invaluable in your quest for financial transparency and trustworthiness.

1. Have A Formal Record-Keeping Process

Every business should have a formal way to keep accurate financial records, such as accounting software or a point-of-sale system. But beyond just keeping records, a business owner should routinely review financial statements each month. This will help you ensure nothing is amiss, while also keeping an eye on the financial health of your business. - Allison Kelly , ICA Fund

2. Implement An Internal Audit Team

A robust internal audit function is a key strategy to ensure the accuracy and reliability of financial statements. This independent team carefully scrutinizes financial processes, identifies any discrepancies and recommends corrective actions. By regularly reviewing and testing financial data, internal auditors instill integrity, inspire confidence among stakeholders and ensure adherence to accounting standards. - Michelle Austin , Keegor Group of companies

3. Operate An Internal Control System

Startups need to maintain accurate financial records to properly manage their financial health and boost stakeholders' confidence. One strategy for this is to implement a robust internal control system for financial reporting with policies and procedures for employees at all levels. This can help startups reduce the risk of errors and improve the quality of their financial statements. - Lise Birikundavyi , BKR Capital

4. Utilize Machine Learning And AI

The one strategy to put in place to ensure that the company's financial statements are accurate and reliable is to build system-driven controls that ensure proper transaction coding through machine learning and AI, system-driven segregation of duties, programmed authorization and approval workflows, auto reconciliation and system driven monitoring and oversight flags. - Mitt Mehta , Urgent Care for Children

Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?

5. Segregate Duties And Have A Clear Hierarchy

Our company prides itself on displaying absolute transparency of our fiscal standing. Segregation of duties is vital as it helps identify cross-functional mistakes and holds the entire finance team accountable. This, coupled with a clear hierarchy of authorization, has allowed our organization to keep decisions where they should lie within the org chart. - Bryan White , Isaiah 117 House

6. Monitor Your Margins Daily

Daily monitoring of margins is essential while assessing if our margins are determining our production environment or if the production environment is dictating our margins. Adjust accordingly to this question. - Quinton Harris , Bank of England Mortgage

7. Implement An Automated System

Implement automation for accurate and reliable financial statements. Automation helps teams streamline workflows and reporting processes, minimize human errors, ensure compliance and enable faster and more accurate financial reporting. It's essential to choose the right tools that align with your company's needs and invest in training for teams to make the most out of automation capabilities. - Razzak Jallow , FloQast

8. Put A Cross-Verification Process In Place

One of the ways we ensure the accuracy and reliability of financial statements is by cross-verification of the process and results. Once the trades or transactions are completed we ensure double verification for each step and this helps eliminate any potential errors. Segregation of duties along with cross-verification has worked out best for our firm. - Raghavkumar Parmar , MMA Pan Asia Fund Management

9. Foster An Environment That Values Honesty And Proactivity

Act with a set of values that foster honesty, proactivity and professionalism. This will not only ensure the accuracy and reliability of financial statements but also of the business overall. - Vlad Spiridon , Novartis

10. Institute A Layered Quality Review

Automate key business systems and processes, train your personnel and institute layered quality review functions during the preparation of the company's financial statements. Single points of failure and manual processes should be eliminated. A timely pre-close by the accounting team combined with a flux analysis and review by the FP&A team are necessary steps toward ensuring accuracy. - David Samuels , DrFirst, Inc.

11. Employ Digital Transformation Applications

Digital transformation applications should be top of mind for business leaders prioritizing and producing accurate and reliable financial statements. However, many business leaders underestimate the need for key experienced personnel who are trained to use the new technology. - Omar Choucair , Trintech

12. Go Back To The Basics Of Reporting

Ensuring your financial statements are accurate and reliable starts with the basics of financial reporting. Are your books clean? Do they reflect the latest costs? The best way to get to the numbers is by setting up accounting software that is designed for your business and educating management on how to interpret the monthly reports. Then spend time analyzing the reports with your teams. - Kaylin Leland , Fourlane

13. Perform Periodic Sheet Audits

A very simple solution for smaller businesses to ensure accurate and reliable financial statements is to perform periodic balance sheet audits. You can check bank and loan balances against statements, and if the balance sheet doesn't reflect reality, you know you have an error. - Vlad Rusz , Centaur Digital Corp.

14. Hire A Chief Financial Officer

As a lot of this is out of my knowledge scope—we hired a fractional CFO. I did not hire the cheapest one interviewed. I simply went with my gut as to who I could communicate with. Truly the best decision I have made in my more than 40 years in business. - Ronald Stair , Creative Plan Designs, Ltd.

15. Implement Safeguarding Procedures

One strategy to ensure the accuracy and reliability of your company's financial statements is to implement a robust internal control system to establish clear policies and procedures designed to safeguard assets, prevent errors and detect fraud. By consistently adhering to these controls and conducting periodic assessments, the company can enhance the trustworthiness of its financial reporting. - Amanda Kristinat , Moonshot

16. Validate Internal Processes

No one strategy is enough but as long as you do the things that are table stakes (i.e. segregation of duties) internal controls and monthly closing of books then having an independent internal audit is the key to having accurate and reliable financial statements. An independent internal audit tests and validates internal processes which ensures that the results are accurate. - Anisha Madan , Emids

17. Engage Third-Party Experts

Implement a robust internal control system, segregating duties and requiring multiple levels of approval for financial transactions. Regularly reconcile accounts, perform independent audits and engage third-party experts to enhance transparency and accuracy. - Bilal Surahyo , Simpli Home

18. Reconcile Key Accounts Consistently

Have a consistent and regular cadence of quality review mechanism built into the work plan of the finance function. Conduct desktop review, call over of transactions and reconciliation of key accounts before final book closure monthly—accurate data entry using automated technology and reconciliation systems. You can test compliance with policies and procedures through internal controls and audits. - Oluwatoyin Aralepo , Mastercard Foundation

19. Hire Qualified Professionals

Hire a qualified and experienced professional; focus your expertise on what you know. They will follow best practices, adhere to laws and be well-versed in financial reporting requirements and reconciliation processes. Let them ensure that your financial statements are prepared properly. Periodic reviews will strengthen their reliability and provide valuable insights for you to base future decisions. - Christina DeSimone Nappi , The DeSimone Agency Inc.

20. Implement A 'Double-Check' System

You'll want to implement a "double-check" system to ensure your company's financial statements are accurate. By working with multiple accounting firms, along with a killer fintech accounting platform, your margin for error will decrease significantly. - Yaakov Goder , Millendeal

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