How To Create a Personal Balance Sheet

personal cash flow statement

The first step to managing your finances is understanding where you currently are. This can be accomplished with the use of a personal balance sheet that will clear your confusion by presenting you with a clear picture of your financial position.

Although it can appear to be a daunting, technical phrase reserved for corporations and accountants, a personal balance sheet is simpler than it seems and is the ideal tool for addressing your financial situation and building a steadfast future.

Making a personal balance sheet will uncover new possibilities and point out hazards that need to be addressed, whether they are for the now or for the next ten years.

This document is crucial for making decisions throughout your whole life. It’s an extremely useful tool to improve your finances, plan more activities, live well in retirement, and, who not, leave money for your heirs.

 

Personal Balance Sheet

 

What is a personal financial statement?

A personal financial statement is a spreadsheet that lists the assets and debts of a single person or a couple at a certain point in time. It usually consists of two parts – the personal cash flow statement and the personal balance sheet.

You may use this statement as a tool to examine your present financial situation, track your net worth, and establish financial objectives. Lenders frequently look at these documents when a customer asks for credit or a loan, including a mortgage.

What is a personal balance sheet?

A personal balance sheet reports what you own and what you owe. To put it simply, it’s the document that helps you keep track of your money and all the important metrics required to comprehend your financial situation. Its purpose is to assist you in increasing your assets while controlling and even decreasing your liabilities. This activity is essential if you want to increase your net worth as you go through life.

A typical personal finance balance sheet consists of:

  • Assets: Anything of value you possess, such as accounts, tangible, and intangible objects.
  • Liabilities: The total amount owed on all of your debts.
  • Net worth: The difference between your total assets and liabilities.

How to create a personal balance sheet?

Accurate information is necessary for accurate calculations. To collect the most recent data, you should assemble all of your financial records and most recent financial statements. This contains receipts from creditors, creditor billing statements, loan paperwork, investment reports, and more. Once you have all the documentation, follow three simple steps.

Step One. List your assets

While some assets are physical, others may be intangible. Assets might include money, investments, real estate, household goods, and pre-paid bills. If necessary, you can place assets in separate categories:

  • Cash and Cash Equivalents
    • Cash on hand
    • Checking accounts
    • Savings/money market accounts
    • Cash value of life insurance policies
  • Investments
    • Certificates of deposit (CDs)
    • Mutual funds
    • Stocks
    • Bonds
  • Personal Property
    • Real estate (primary residence, vacation property)
    • Business (best to seek outside advice to value your business)
    • Other (jewelry, family heirlooms, collectibles, etc.)
    • Cars (unless leased)
  • Retirement Accounts
    • Pension fund
    • RRSP
    • Other retirement accounts

If you have personal property that you are putting in your assets but are unsure of its value, consider enlisting the help of a reliable financial advisor.

 

personal finance balance sheet

 

Step Two. List your liabilities

Your liabilities are basically everything you owe to lenders or creditors. For convenience, these can also be divided into categories.

  • Mortgage
  • Home equity loan
  • Car loans
  • Unsecured personal loans
  • Student loans
  • Credit card balances
  • Unpaid medical bills
  • Unpaid taxes

Step Three. Calculate your net worth

Calculating your net worth is quite simple: just add up all your assets and then subtract total liabilities. If you use a tool like an Excel spreadsheet, you can easily click and drag to have your computer perform most of the work.

Keep in mind that your net worth might be negative. However, you don’t need to worry because it’s pretty common, especially if you’ve just purchased a home or are still making student loan payments.

Reviewing your personal balance sheet should be an annual exercise you can do by yourself. However, you may still need professional advice to make sure everything is going well. Contact The McClelland Financial Group of Assante Capital Management to schedule a meeting with the best Toronto financial advisors whose prime objective is to help people achieve their financial goals.

Whether it’s retirement planning, portfolio management, tax strategies, insurance, or estate planning, our team is here to understand exactly what you want and work in partnership with you to offer you wealth management solutions that are tailored to your goals and ensure outstanding results.

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