The Importance of Having a Personal Financial Statement

worth. All you need is a sound mind, simple calculation ability (or a calculator), a pen, and a paper.

Although human mind is compared to a super computer, it fails to live up to the definition when it comes to tracking expenses. One practically cannot remember all the expenses incurred in a month, let alone years and a lifetime. Hence, a written data is needed.

No other form of document can serve the purpose than a personal financial statement. This document can store everything from a simple expense to complicated things like compound interest over years and investment growth. However, due to its flexibility and ability to track all the expenses, people generally start quivering only by thinking bout it.

Deriving a personal financial statement, however, isn’t a difficult task, not at least for finances professionals. It simply depends on how you want to keep a track of your finances, investments, and net

Financial statement of a corporate body is complicated. It involves balance sheet and income statement of the organization. You can have a similar pattern, or modify few arrangements to simplify it.

Even a simple financial statement would help you recognize your current financial stability. Income statement focuses on your monthly income and expenses, whereas the balance sheet defines your assets and liabilities.
These both documents together comprise of a personal financial statement. However, each of them individually doesn’t reveal the entire picture. Hence, it’s quite important to have both of them.

Looking at your financial statement, you can set your personal goals. If you want to get out of debt, you will have to work on getting positive income statement with income more than expenses. Similarly, if you want to have long term investments, you should increase your assets and lower your liabilities.

Major decisions like buying a home, or applying for a mortgage, or going on a vacation can be made by simply glancing through your financial statements. Although you mind may actually not be a super computer, if you use it in the right way, it can do wonders.