• Alex Mizerski

What is a personal financial statement?

Updated: Jan 2, 2021

A personal financial statement is very similar to a net worth report where all your assets and liabilities are listed along with your total net worth. What makes a personal financial statement different from a net worth report is the inclusion of an Income Statement and Balance Sheet (this resembles your net worth report). Typically these are used for a few reasons:

  1. Personal knowledge to help track personal finance related information

  2. Business loan applications

  3. Financial advisors ask for this information

What is a personal financial statement?

A personal financial statement is a full and clear representation of your financial situation at a specific point in time. Note that I mention personal and not business. So when you are building a personal financial statement you only include your personal assets and liabilities along with your personal income.


Why do I need a personal financial statement?

As mentioned above you may be asked to prepare a personal finance statement when you are applying for a business loan. Another instance where this type of statement may be useful is if you are purchasing an existing business. In this situation, you would be asking for a business loan, but the circumstances are slightly different and could require a slightly different format of the statement.


In addition, you may want to prepare if you are going to buy a house or car. This will help you better understand how much you can afford to spend on either of these very large expenses. When applying for a mortgage or car loan all of the information included in a personal financial statement will need to be collected by the mortgage officer or the car loan officer. So having all the necessary information in one place can make the process go smoother.


What exactly should be included?

If you weren't already thinking of this question, don't worry I have you covered. The list below is by no means exhaustive so you will want to be thorough with your assets and liabilities and include them all.


Examples of personal assets:

  • Cash - checking, savings, and everything in your wallet and piggybank combined

  • Stocks

  • Bonds

  • Real Estate (personal only, if you own a duplex or rent a house that is business)

  • Retirement accounts

  • Personal property (TVs, couches, etc)

  • Cars

  • Jewelry

  • Collectibles (baseball cards, antiques, comic books, etc.)

  • Annuities

  • Pensions

  • Certificates of deposit

  • Treasury bills

Anything that holds value that you could potentially sell at a later date or currently holds value (cash) is considered an asset. All of these things should be included when building a personal finance statement.


Examples of personal liabilities:

  • Mortgage

  • Car loans

  • Credit card balance(s)

  • Personal loans

  • Monthly bills

  • Home equity loan(s)

  • Open lines of credit

  • Hospital bill(s)

  • Bank account overdrafts

  • Student loans

  • Unpaid taxes

Anything that you have to pay back is considered a liability and should all be included when building a personal finance statement.


Summary:

There are many reasons that someone might want to put together a personal finance statement. Whatever your reason make sure to take your time, be thorough, and don't try to hide anything because that won't help. All of your assets and definitely your liabilities can be found by mortgage lenders, banks, or where ever you might get your car loan from. It is better to be upfront about your situation and talk through your options openly. No matter your situation don't be afraid to share that when you are asked to share your personal finance statement.


If you want to read more about personal finance and net worth check out the following articles:

Building a simple net worth tracker

Personal finance basics

Ways to dramatically impact net worth


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