What is a Personal Financial Statement?

What is a Personal Financial Statement?

By: Ashley Lewis

A personal financial statement refers to any document/spreadsheet that clearly outlines your financial position.  This statement usually includes a breakdown of total assets and liabilities.  An asset is something that provides a current, future or potential economic benefit to you.  A liability is something that you owe, usually a sum of money.  Assets can include the balance in your checking/savings accounts, real estate, retirement account balances.  Liabilities include any debt that you have including car loans, mortgage, personal loans, credit cards.

Financial statements can be useful to track your net worth.  Net worth is the value of all assets, minus the total of all liabilities.  Your net worth is how much you OWN minus how much you OWE.  The value of cash (assets) you would have if you would sell off everything and pay off all your debts.  When assets exceed liabilities, you have a positive net worth.  The higher your net worth, the more stable your financial position.

Net worth is a key factor in determining progress toward a financial goal, planning for retirement, or demonstrating creditworthiness for a loan and establishing personal wealth.  Having these documents on hand and up to date allows you to track your overall financial health and see if it is improving or declining over time.

Key Takeaways-

  • Your Net Worth can fluctuate overtime as the value of your assets/liabilities change.
  • A personal financial statement should list ALL of your assets & liabilities.
  • Your Net worth is calculated by subtracting your total liabilities from your total assets—this can either be a positive or negative number, depending.
  • A personal financial statement is good to track financial goals, retirement planning or if you are needing credit.

One of our financial experts at First Bank would be happy to help get your financial statement started. Contact us for more information!