Personal Financial Statement – Personal finance is a subject that teaches you how to manage your money either you are earning low, average, or more. Robert Kiyosaki taught us personal financial statement for everybody and make us understand the cash flow pattern. The personal financial statement takes us to get to know our Net Worth.
With the use of a personal financial statement, you will know where you are currently lying. That will tell your current financial health. In the book Rich Dad Poor Dad, a personal financial statement will tell you what numbers of your current financial statements are?
In a personal financial statement, there are 4major categories i.e., income, expenses, assets, and liabilities.
Income & expense falls into the personal income statement & Assets and Liabilities are fall into the personal balance sheet. If you wanted to know more about your balance sheet click here.
In a personal Income statement, there are two categories, Income & Expense:
Income further categorized as follows:
- Ordinary Income
Ordinary income is that income for which you must give your active time. Majorly this income is from your job and self-employment. In both cases, you must present to earn your income otherwise you will not get anything.
- Portfolio Income
When you invest your money into shares, gold, real-estate property, or stand your business and sell all these for an appreciated amount. The capital you gain is your portfolio income.
- Passive Income
When you purchase shares in your Demat account and receives dividends, invested your amount into fixed deposits & received interest; buy real estate property & rented out are comes under passive income. The dividend you receive, interest on FD, rent on the property are fall into this category.
The amount you pay on liability is your expense related to that liability. The spendings include monthly payments you make for things such as utilities and food.
Whatever liabilities we add, will directly be associated with your expenses. Our expenses are broad categorized into two categories:
- Fixed Expenses – Mortgage/Rent payment, Loans (Education/Auto/Home, other loans), Insurances (Auto/Health/Life), Tuitions.
- Discretionary Spending’s – Groceries, Eating at restaurants, Clothing, Entertainment, Travel, Hobbies, Gifts/Charity.
HOW TO USE SPREADSHEET FOR PERSONAL FINANCIAL STATEMENT?
I have prepared a personal financial statement spreadsheet in which you only need to add your financial data & you will find your Net Worth. This spreadsheet will help you to know what your cash flow is and where your money is flowing. The spreadsheet also tells you about your assets and liabilities. It will give you an overall picture of your financial health.
The personal financial statement spreadsheet will look like this:
In this spreadsheet, there are two separate sheets. The first sheet is a summary sheet where you will get your financial health. The second sheet is the transaction sheet, where you need to provide your inputs.
The transaction sheet is an input sheet where you need to enter data related to your expenses, income, assets, and liabilities.
EXPENSE & INCOME INPUT
Under expense input, click, under the category, you will find a drop-down list and select your expense. Under the date column, you may enter the date of your expense. The expenses amount against that category you can write under the amount column. If you need to enter any description you may enter under description. When you list down your expenses, it will look like below:
Just like you enter the data of your expenses, you can enter the input for your income. Under income, the input category will majorly into salary, income, passive income, and portfolio income.
ASSETS & LIABILITIES
Under asset input, there are two different sections. First are actual assets whose value increase with time & the second section is depreciating assets whose value may or may not increase with time. Majorly their values decrease.
Just like income & expenses, liability input can be used. There is also a drop-down list you need to select your category & write down the liability amount.
After entering your inputs in the transaction sheet, you need to check your summary sheet. You can find your Networth at the top. Your total expense value and your total income value find under the income & expense table. Similarly, you can find your assets and liability values.
There is a cash flow statement where you can find where your money is flowing.
For the Net worth, there are two separate Net worth tables. First, Networth has included your actual asset along with depreciating assets. In the second Net Worth table, your depreciated asset is not excluded. So, you can have both the Net worth values.
In the spreadsheet, you have the flexibility to enter your category as per your convenience under the cash flow, assets, and liability list. You can find entry rows where you can enter your category.
Whatever you mention in these entry rows, will automatically be linked with a drop down list in the transaction sheet.
You can empower your financial health and track or set future targets with the help of this spreadsheet. With the benefit of a personal financial statement spreadsheet, it becomes clear to see where you are financially and how to build your road map to financial freedom.