Sample Personal Financial Statement
Most household budgets are quite dynamic and, like a river or stream, are constantly changing and subject to unexpected disruptions. So how do you know what the financial health of your household is at any given point? If you want to see a snapshot of your finances at a particular point in time or wish to monitor fluctuations in the value of your assets or level of liabilities and net worth, you will want to create a personal financial statement.
To help you begin the process, we provide a sample template for a personal financial statement below.
What Is a Personal Financial Statement?
A personal financial statement is simply a document that shows your assets and liabilities in detail. Usually, it has two sections: a balance sheet section and an income flow section.
This statement is split into two main components: assets and liabilities. Assets are things such as income, securities, and properties, while liabilities refer to things such as debts, unpaid bills, and overdue taxes.
The Importance of Using Personal Financial Statements
Each time you prepare such a statement, you create a snapshot of your finances at a particular point in time. To monitor fluctuations in your finances, you may choose to prepare a financial statement periodically (on a set date every month, quarter, bi-yearly etc.) and compare statements. You can also use these financial statements to experiment with different budgetary options and to plan for certain possible outcomes.
How To Make a Personal Financial Statement
You can use a standard form to create a personal financial statement. Usually, assets are shown on the left and liabilities on the right. Your net worth is also displayed on the right side of the statement. Before making a financial statement, gather information on your finances, including:
- Unpaid income taxes
- Latest statement of your loans such as business loans and car loans
- Personal property with good value
- Any real estate income
- Bank statements for checking and savings accounts
- Your investment income, IRA and retirement funds
You should also run a credit report on yourself. This is particularly important if you are preparing the statement to apply for a loan from a financial institution. Your lender will likely run a credit report on you, so it's good to know where you stand.
Personal Financial Statement Template
|Cash (in the bank, CDs, money market accounts)||$__________|
|Securities (mutual funds, college savings, etc.)||$__________|
|Real Estate (resale value of your home)||$__________|
|Vehicles (resale value)||$__________|
|Cash Value Life Insurance||$__________|
|Individual Retirement Accounts||$__________|
|Credit Cards Payable||$__________|
|Real Estate Mortgages Payable (remaining balance)||$__________|
|Land Contracts Payable||$__________|
|Life Insurance Loans||$__________|
|TOTAL LIABILITIES AND NET WORTH||$__________|
|(Assets always equal Total Liabilities and Net Worth)|
How To Fill Out a Personal Financial Statement
After you gather all the relevant information, start listing your assets in the asset section. Make sure to use the current market value of the assets you list. Then list all your debts in the liability section.
Once you document all asset and liability figures, total both separately. Next, subtract total liabilities from total assets to get your net worth. Certain types of debt, such as a mortgage, can be considered "positive" debts as long as you're able to consistently make your monthly mortgage payments.
How To Use a Personal Financial Statement
It is important to be as honest as you can when calculating your liabilities and income since you will be able to make better decisions with the most accurate information. And if your net worth is negative, this doesn't automatically mean you're in financial trouble (and likewise, even those with a positive net worth can have some financial problems to iron out).
Of course, any personal financial statement needs additional context in order to have sufficient meaning. For instance, someone pursuing an advanced degree may be racking up debt while bringing in very little income, but that educational investment purportedly will pay off in a higher salary after graduation.
Your ultimate goal is to regularly increase your assets while making sure your liabilities are kept in check and on a downward trajectory. And keep in mind that the cost of carrying debt (particularly credit card debt) is reflected in interest rates that are generally higher for those with lower credit scores.