How to Prepare a Personal Financial Statement

A personal financial statement provides a snapshot of an individual’s financial standing, detailing assets (what is owned) and liabilities (what is owed). It is a valuable tool for personal financial planning, assessing overall financial health, and securing financial opportunities. Lenders frequently request a personal financial statement when evaluating applications for loans, mortgages, or lines of credit, as it helps them determine an applicant’s ability to manage and repay debt.

Identifying and Valuing Your Assets and Liabilities

Creating a personal financial statement begins with identifying and accurately valuing all financial components. This involves gathering current data for both assets (what you own) and liabilities (what you owe). The precision of these figures is important for a reliable financial overview.

Liquid assets represent cash and items that can be quickly converted to cash without significant loss of value. This category includes funds held in checking accounts, savings accounts, money market accounts, and certificates of deposit (CDs). Current balances for these accounts can be readily obtained from recent bank statements or through online banking portals.

Investment assets encompass a range of holdings intended for wealth growth. These typically include stocks, bonds, mutual funds, and balances within retirement accounts such as 401(k)s and Individual Retirement Accounts (IRAs). The current market value for these investments should be used, which is usually available on recent brokerage statements, retirement account statements, or through online investment platforms.

Real estate holdings, such as a primary residence, rental properties, or other land, represent a significant asset for many individuals. Valuing real estate requires an estimation of its current market value, which can be determined through recent professional appraisals, comparative market analyses from real estate agents, or by utilizing reliable online valuation tools.

Personal property includes valuable tangible items that are not real estate, such as vehicles, jewelry, art, and significant collectibles. For vehicles, resources like Kelley Blue Book provide a standard method for estimating current market value. High-value items like fine art or unique collectibles may require a professional appraisal. For general household goods without readily ascertainable market values, conservative estimates of what they would sell for in their current condition are appropriate, focusing on current market value rather than original purchase price.

Liabilities represent financial obligations, categorized into secured and unsecured debts. Secured debts are those tied to a specific asset that can be repossessed if the debt is not repaid, such as mortgages on real estate or auto loans. Loan statements provide the current outstanding balances for these types of debts.

Unsecured debts are not backed by collateral and include credit card balances, student loans, medical bills, and personal loans without specific collateral. Obtaining accurate outstanding balances for unsecured debts typically involves reviewing recent statements from creditors or accessing online account portals.

Assembling Your Personal Financial Statement

After identifying and valuing assets and liabilities, organize this information into a structured personal financial statement. This document typically follows a standard format, often presented in a two-column layout, clearly separating assets from liabilities.

Assets are usually categorized to reflect their liquidity, which is how easily they can be converted to cash. Common categories include Current Assets (like cash and bank accounts), Investment Assets (such as stocks and retirement funds), and Fixed Assets (like real estate and significant personal property). Liabilities are similarly grouped by type, commonly into Current Liabilities (debts due within one year, like credit card balances) and Long-Term Liabilities (debts due beyond one year, such as mortgages).

The core calculation of a personal financial statement is the determination of your net worth. This is achieved by subtracting your Total Liabilities from your Total Assets. The resulting figure, your net worth, provides a single metric that represents your overall financial health at that specific point in time.

The “as of” date specifies the exact point in time the financial snapshot represents. Since financial positions can change rapidly, clearly dating the statement ensures its relevance and accuracy. Using clear headings, subtotals, and consistent formatting enhances readability. Many individuals find it convenient to assemble their personal financial statement using spreadsheet software or readily available templates.

Finalizing and Maintaining Your Statement

After compiling your personal financial statement, review it for accuracy. Double-check every figure against source documents, such as bank or loan statements, and verify all calculations, especially net worth. Consistency in valuation methods across all assets is also important to ensure the statement presents a true financial picture.

Perform a completeness check to ensure no significant assets or liabilities have been omitted. Overlooking items could misrepresent your financial standing. For official use, signing and dating the statement attests to its accuracy and completeness.

Secure storage of your personal financial statement and supporting documentation is important. Physical documents can be kept in a fireproof safe or secure filing cabinet. For digital copies, use encrypted cloud storage services for protection against unauthorized access and data loss.

Regularly updating your personal financial statement is beneficial. While an annual review is a common recommendation, updating it more frequently, such as quarterly or whenever a significant financial event occurs, can provide a more dynamic view of your financial progress. Major life changes, like purchasing a new home, taking on a large loan, or experiencing a substantial shift in income, warrant an immediate update to ensure the statement remains current and relevant for financial planning and decision-making.