What Is a Personal Financial Statement?
A personal financial statement is a spreadsheet that details the assets and liabilities of an individual, couple, or business at a specific point in time. Typically, the spreadsheet consists of two columns, with assets listed on the left and liabilities on the right.
Why is a personal financial statement useful?This statement is a tool that can be used to analyze your current financial status, enabling you to track net worth and set financial goals. These statements are often reviewed by lenders when a client applies for credit or a loan, including a mortgage.
What are assets and liabilities?Assets are investments and property of significant value that can be used as collateral to secure a loan. While salary and other forms of income are not listed as assets, lenders will typically ask to see them, listed separately, to gain a better understanding of your ability to manage liabilities. Common assets include:
- Account balances: savings, certificates, money market accounts
- Investment balances: stocks, ETFs, mutual funds, bonds, annuities, cash-surrender values of life insurance, commodities
- Retirement accounts: 401(k)s, IRAs
- Real estate
- Valuable personal property: vehicles, boats, jewelry, or collectables
- Credit cards
- Student loans
- Unpaid medical bills or unpaid taxes
- Mortgages or vehicle loans
- Loans that you have co-signed