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A personal financial statement is a comprehensive overview of a person’s or a household’s finances. It provides them with a snapshot of their financial standing at any given moment.
Without insight into personal finances, reaching financial goals and saving money can be difficult. Personal financial statements, which are spreadsheets or physical financial documents, can provide individuals with a clear snapshot of their financial situation at a given time.
Individuals can create and use these statements for themselves or to assess the entire household’s financial health and generally help manage money. Plus, a personal financial statement can also help individuals hone in on their financial situations at a specific point in time.
Read on to learn what a personal financial statement is, why people may use it to help them save money, reach their financial goals, and more.
Table of contents
Every personal financial statement should include two parts:
Here's what goes into each.
Assets can be cash, investments, and other items of value that someone owns. Common examples of assets include:
A personal income statement lists various sources of income along with the estimated monthly and annual totals. These may include income from:
When creating a personal financial statement, individuals should account for all income sources, however large or small. The more accurately the statement shows income earned, the more accurate the snapshot of the person’s financial situation will be.
Liabilities are outstanding debts that generally appear with the monthly payment and the current balance. They may include debt from revolving credit debt like credit cards and personal lines of credit.
As a general rule, any money an individual owes to someone else counts as a liability, even if it’s an informal loan.
An individual’s net worth refers to the value of their total assets minus their total liabilities. Typically, the net worth calculation looks something like this:
[Total assets] - [Total liabilities] = Net worth
Depending on a person or household’s total debt, their net worth may be positive or negative. Having less debt than assets results in a positive net worth. Having more debt than assets results in a negative net worth.
Having a negative net worth isn’t necessarily bad. For example, many people have a negative net worth while paying off their mortgage.
Remember that net worth isn’t a full indication of someone’s financial health, but can serve as another tool to broadly encapsulate what someone owns and owes.
Though personal financial statements help give people a stronger understanding of their overall financial position, there are some types of information that people should leave out if they want to see a snapshot of their financial situation at a given time. This includes:
Some financial institutions may have personal financial statement forms for customers, but people can also create their own statements using a spreadsheet, software, or even a piece of paper.
Here are the steps to take when creating a personal financial statement so people can access the information they need to improve their savings plans:
Review the most recent statements or log into every financial account to find current balances and monthly payments. Use these to add up current assets, liabilities, and income.
It may be possible to connect accounts to a well-trusted budgeting app to find and easily capture current balances. Even if the apps don't call it a financial statement, many make it easy to review assets, liabilities, and net worth.
However, individuals may need to calculate their income separately. Track monthly savings and spending regularly may make this process easier.
After gathering all relevant financial information, start separating assets from liabilities. Create a running total of all assets, including but not limited to assets such as:
Items individuals and households own should count toward the total value of the assets on the personal financial statement.
After totaling up the assets, total up the value of all liabilities. This may include debts such as:
This value will typically change over time. As people pay off what they owe, the total value of their liabilities may decrease.
After totaling assets and liabilities, enter each number into the net worth calculator. Here’s an example:
Say a person has assets totaling $200,000 and liabilities totaling $150,000. Using the net worth calculation, the formula would look like this:
$200,000 - $150,000 = $50,000
In this example, the individual has a net worth of $50,000.
It’s possible to create a personal financial statement from scratch, but doing so puts people at risk of leaving out key information. Without all the necessary details, their financial health may not be clear or accurate.
Here’s an example that individuals can use to create a personal financial statement.
There are various reasons someone may want to create a personal financial statement, such as:
For people who don't create monthly or bi-weekly budgets or track their accounts, creating a financial statement may be a helpful way to understand their savings, debt, and overall financial health. It may spur them to start saving money or reassure them that they're doing well financially.
Reviewing a financial statement may be helpful before making a big decision, such as deciding between buying a new or used vehicle. It can give someone a clearer picture of where their finances stand and, in turn, potentially help them figure out whether a significant purchase is the right choice. This helps them establish a more comprehensive money management plan that helps them reach their goals.
People may want to track their financial statements over time to see how they're progressing with financial goals. For example, someone could list an emergency fund under their assets and keep track of any growth in their balance from one month to the next.
Similarly, tracking total liabilities could be helpful when paying off debt to visualize progress and maintain a plan to pay it off.
All in all, personal financial statements can often be an important tool for tracking financial health over time. Regularly updating them may make it easier to continuously follow progress toward financial independence.
These statements can help individuals better understand their finances and find ways to boost their savings in the long run. But building savings more aggressively is easier with the right savings account.
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Here are some frequently asked questions about personal financial statements to further help individuals and households better understand how these statements can help them manage their finances.
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