Personal financial statements are essential to the financial planning process. Without these statements, it is difficult to help an individual to achieve his or her financial goals and objectives.

A. Statement of financial position
Also known as a balance sheet, a statement of financial position shows a person's assets, liabilities and net worth as of a given date. Think of it as a snapshot of an individual's financial condition at a given moment in time.

Assets appear first on the statement of financial position with the assets listed in order of liquidity, beginning with cash accounts. Listed next would be other assets that could be liquidated quickly, if necessary, such as mutual fund or stock shares. Assets that would take time to liquidate, such as real estate or ownership of a closely held business, would appear near the end.

Listed alongside each asset is the estimated value of that asset. The value of each asset is added to come up with a total assets figure.

Liabilities appear second on the statement of financial position with the individual liabilities appearing in the order they come due. Current liabilities, those that are due within one year, would be listed before noncurrent liabilities, which are those that are not due for more than one year.

As with assets, listed along each liability is the estimated value of that liability. The value of each liability is added up to come up a total liabilities figure.

Total liabilities are subtracted from total assets to determine an individual's net worth. If liabilities exceed assets, an individual would have a negative net worth.

JAMES L. and SUSAN M. DAVIES
STATEMENT OF FINANCIAL POSITION
Year ending Dec. 31, 2006

ASSETS LIABILITIES
Cash accounts Short-term debt
Checking account $2,400
Credit cards $2,450
Money market 16,345 Home equity LOC 6,320
Total $18,745 Total $8,770
Investment accounts Long-term debt
S&P 500 Index fund1 $23,976 Auto loan $13,000
Roth IRA - James 18,765 Mortgage3 230,000
Roth IRA - Susan 16,543

401(k) - James
98,654 Total $243,000
Total $157,938 TOTAL LIABILITIES $251,770
Use assets
Autos 18,976
Personal property 35,000 NET WORTH $282,889
Residence2 304,000
Total $357,976
TOTAL LIABILITIES
TOTAL ASSETS $534,659 AND NET WORTH $534,659

1
JTWROS

2 Originally purchased 5 years ago for $249,500

3 Fixed rate loan, 6.5%, 25 years remaining


Statement of Cash Flow

Related Articles
  1. Personal Finance

    How To Improve Net Worth By Decreasing Liabilities

    Here's an analysis of how to adjust liabilities and assets to improve net worth.
  2. Investing

    Evaluating Your Personal Financial Statement

    Determine your net worth by making your own cash flow statement and balance sheet.
  3. Investing

    What is Net Worth?

    Net worth is the amount by which assets exceed liabilities. Another way to say this is, it's the value of everything you own, minus all your debts.
  4. Investing

    Current Liabilities

    Current Liabilities are company debts due within one year or one operating cycle, whichever is greater. An operating cycle is the time it takes a company to purchase inventory and convert it ...
  5. Investing

    Breaking Down The Balance Sheet

    Knowing what the company's financial statements mean will help you to analyze your investments.
  6. Personal Finance

    Common Liabilities That Hurt Your Net Worth

    Every penny that you keep out of the liability side of the net worth equation essentially ends up on the asset side.
  7. Investing

    Explaining Noncurrent Liabilities

    Noncurrent liabilities are financial obligations a company owes a year or more into the future.
Frequently Asked Questions
  1. What are Common Examples of Monopolistic Markets?

    Discover what causes real instances of market monopoly, how it persists and where monopoly privilege is most common in the ...
  2. What is the gold standard?

    The gold standard is a monetary system where a country's currency or paper money has a value directly linked to gold, but ...
  3. What's the most expensive stock of all time?

    The most expensive publicly traded stock of all time is Warren Buffett’s Berkshire Hathaway.
  4. What is a "socially responsible" mutual fund?

    As the name suggests, socially responsible mutual funds invest exclusively in socially responsible investments.
Trading Center