Personal Financial Statements: Effective Guide (With Examples)

A common misconception is that only accountants and other business professionals read financial statements. In reality, individuals from all walks of life can benefit from understanding the information contained in these reports. You can learn more about financial statements by studying the examples of personal financial statements below.

Personal financial statements can be extremely helpful in understanding your finances. If you look at your income, expenses, and assets, you can make informed decisions in the future.

This article will provide an overview of personal financial statements, including their purpose and examples.

What Is a Personal Financial Statement?

The personal financial statement is a document that details all your sources of income and expenses over a particular period. Knowing the costs incurred for a given period can help you analyze your income and financial position. 

The personal financial statement gives you an insight into your current financial situation. The document details on your assets (property, savings, investments, etc.), liabilities (debts and other obligations), and net worth.

Your net worth is calculated as the difference between your assets and liabilities. This figure can measure your overall financial health and track progress over time.

Types of Personal Financial Statements

There are three main types of personal financial statements: the balance sheet, income statement, and cash flow statement. 

1. The Balance Sheet

Balance sheets list a person’s assets and liabilities and provide a snapshot of their financial condition at a given time. 

2. The Income Statement

Revenue and expenses are recorded during a particular period, such as one month or year. 

3. The Cash Flow Statement

A cash flow statement shows money flow into and out of business over a certain period. For an individual, this would include earnings, investments, loans, etc. 

Generally, consolidated financial statements help you understand your entire financial picture and provide a snapshot of your financial situation. 

Importance of Personal Financial Statements

There are many important reasons to use personal financial statements. The most obvious reason is that they help you track your current financial situation and performance over time. By reviewing your financial information regularly, you can identify trends in your income and expenses, assess your saving goals, and more. 

Another key benefit of using personal financial statements is that they can help improve communication with lenders or investors. Potential creditors can make sound lending decisions quickly and efficiently when they know where you are financially (including assets, liabilities, and net worth). In some cases, a well-presented personal finance statement is enough to persuade a lender to offer better terms on a loan agreement!

Examples of Personal Financial Statements

A personal financial statement is an account of your personal financial situation. A financial statement is created on a set of agreed-upon principles. These principles include transparency, accuracy, and authenticity.

What’s important is that the financial statement must differ from what a particular person considers their financial situation. In other words, the information should reflect more than the individual’s subjective state of affairs at a given time. Below are examples to guide you:

Example 1: Personal Financial Statement of [User Name]

[Assets]:

A house worth $150,000 

A truck worth $20,000

Investments with a market value of $100,000 

Cash & bank balances of $50,000 

Collectibles and artifacts valued at $45,000

The Total Assets are calculated as follows:

Total Assets = $150,000 + $20,000 + $100,000 + $50,000 + $45,000 

Total Assets = $365,000

[Liabilities]:

A truck loan with a current outstanding of $15,000 

Factory equipment loan with an existing outstanding of $25,000 

Credit card bills worth $5,000 

Other personal loans of $70,000 

The Total Liabilities are calculated as: 

Total Liabilities = $15,000 + $25,000 + $5,000 + $70,000 

Total Liabilities = $115,000

This is what makes a net worth. 

Total Assets – Total Liabilities = The Net Worth

Net Worth = $365,000- $115,000 

Net Worth = $250,000 

[User name] net worth is $250,000. 

Example 2:

Personal Financial Statement 

1) Name of Individual 

2) Address 

3) Social Security Number 

4) Employer Identification Number (if applicable) 

5a. Assets: 

Cash on hand $12, 000

Checking account $60, 000

Savings account $120, 000

Money market funds $15, 000

Total assets = $207, 000

5b. Liabilities: 

Mortgage or home equity loan outstanding balance of $60, 000

Other liabilities–$40, 000

Total liabilities=$100, 000

c. Net worth = Assets – liabilities = $107, 000

Make sure you constantly update your financial statement, so you can monitor your progress and make any necessary adjustments.

Conclusion

Personal financial statements are generally very useful for understanding your overall financial situation. By looking at your income, expenses, and assets/liabilities, you can better understand where you stand financially and where improvements may be needed. Seeing this information in writing can also help motivate you to make changes in your spending habits or save more money!

Though personal financial statements can be daunting at first, they provide an immensely helpful view into your overall financial picture. Use the examples of personal financial statements in this article to improve your current situation or to prevent unpleasant surprises later on.