How to Create your Own Personal Financial Statement—and Why You Want One
A Personal Financial Statement gives you a clear idea of how you’re doing financially at any point in time. It's also a great tool to bring with you when applying for a loan.
Before you start any journey, you need to know where you are. That’s exactly what a Personal Financial Statement is for—it’s a snapshot of your personal financial position at a specific point in time. A step up from a spending plan, it lists your assets (what you own), your liabilities (what you owe) and your net worth (your liabilities subtracted from your assets). Understanding where you are now means you can set future goals and create a plan to get you there. A personal financial statement can also be a great tool when you’re ready to apply for a loan or mortgage.
First, list all of your assets which include (but aren’t limited to):
Your cash: The total balance of your checking accounts, savings accounts and any cash on hand.
Your retirement accounts: Include your 401k and your IRA, if you have them.
Value of significant assets: These are your bigger assets and usually include items like a car, real estate, life insurance policies, material property, and jewelry. Some item values may be variable, so be sure to check in and update those numbers from time to time.
Real Estate: Any piece of real estate or personal property that you own. Specify what type of property it is, the date it was purchased, and its original cost and present market value. You should also include the name and address of each mortgage holder (even if it’s you), each mortgage account number, the balance and status of each mortgage, as well as the amount of money paid against each mortgage every month or year.
Life insurance: List your beneficiaries, insurance company details, and the face amount and cash surrender value of each policy.
Accounts and notes receivable: "They Owe You’s"—any debts or payments that are personally owed to you.
Then, add up the liabilities:
Unpaid taxes: Back taxes, not estimates.
Total real estate mortgage owed, if applicable.
Money you owe institutions: List money you owe to any institution that loaned money to you, such as personal or student loans.
All unpaid accounts: Create an itemized list of open credit card balances or other unpaid accounts. Be sure to list the amount owed and interest impacts.
Unpaid installment accounts: This item will have two lists: one for auto payments and one for any other payments made in installments—but NOT mortgage payments as they should be listed separately.
Life insurance loan, if you have one.
Contingent liabilities: These are kept separate from normal liabilities because they are, in a sense, not your sole responsibility. List any liabilities you have accrued through endorsement or co-creation of, say, a business, as well as any other special debts such as legal claims or responsibilities and income tax provisions on the federal level.
Notes payable to banks and others: List the names and addresses of people and institutions to whom you owe money (the “Noteholders”), as well as original debts, current remaining debts, child support, and the amounts and frequencies of payment installments.
The total sum of all liabilities: Remember, this number must be accurate because you’ll subtract it from your assets to calculate your net worth.
Final math time: Your Assets - Your Liabilities = Your Net Worth