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What is a Personal Financial Statement?
A Personal Financial Statement is a document that summarises your current financial situation by listing your assets, liabilities, and their corresponding value. Ultimately, a Personal Financial Statement shows your net worth.
If your assets are worth more than your liabilities, your net worth is positive. If your liabilities outweigh your assets, your net worth is negative.
A Personal Financial Statement is also known as a:
- Personal balance sheet
- Statement of assets and liabilities
- Net worth statement
What is the purpose of Personal Financial Statements?
As stated above, some people use a Personal Financial Statement just for their own planning and organising purposes. For example, using financial statements could help you when making your Will or preparing for retirement.
Similarly, Personal Financial Statements could help you and your spouse list out all of your separate and shared property during a separation or divorce proceeding.
In other cases, people may be required to create a Personal Financial Statement when applying for mortgages and other loans. For example, if you are starting a business and require a loan, your bank may request one. In these cases, the purpose of the statement is to allow the bank or lender to see what kinds of assets you have in order to gauge your financial situation and evaluate the risk of lending to you.
Some people also use a Personal Financial Statement to disclose all their financial information when providing a guarantee. A guarantee is a written contract in which you agree to accept responsibility for the debts or obligations of a borrower.
Can people make a Personal Financial Statement together?
Yes, multiple people can create a single Personal Financial Statement reflecting their shared and separate assets and liabilities.
For example, spouses may create a Personal Financial Statement together to present their total net worth. This is commonly seen when spouses are applying for a loan together.
What assets do you include in a Personal Financial Statement?
Assets are any tangible or intangible things you own that have a monetary value. Assets include any of the following:
- Cash
- Cash equivalents (e.g., Certificates of Deposit, money market funds, bank accounts, etc.)
- Investments (e.g., stocks, bonds, mutual funds, savings bonds, etc.)
- Retirement funds (e.g., pension plan, Personal Retirement Savings Account (PRSA), etc.)
- Real estate
- Personal property (e.g., cars, boats, planes, etc.)
- Household goods (e.g., furniture, antiques, jewellery, etc.)
- Claims against others
What liabilities do you include in a Personal Financial Statement?
Liabilities refer to financial obligations, debts, or claims you owe to another party. Liabilities may include any of the following:
- Loans (e.g., a mortgage, student loans, bank loans, car loans, etc.)
- Credit card debt
- Owed taxes (e.g., property taxes or income taxes)
- Child support and other financial obligations
- Any other liens, like money owing from a small claims judgment
What does a Personal Financial Statement include?
Generally, a Personal Financial Statement should include the following:
- Your details, including your name, address, phone number, employer, job title, and length of current job
- Information about the recipient of the statement, such as their name and address
- Your assets and their corresponding amounts
- Your liabilities and their corresponding amounts
- Your annual income, including income coming from employment, commissions, bonuses, real estate, and investments
- Your contingent liabilities, meaning the liabilities that you are only responsible for if a certain specified event happens
- Date of statement, because your financial situation can quickly change
