Personal Financial Statements: Financial Tools for Evaluating your Current Financial Position

Preparing Personal Financial StatementsPersonal financial statements form the basis for indicating the starting point of your financial journey and for measuring your financial progress.

The main purpose of these financial statements is to:

  • Report your current financial position in relation to the value of the assets you own and the debts you owe.
  • Measure your progress toward your financial goals.
  • Maintain information about your financial activities.
  • Provide data when preparing tax forms or applying for a loan or credit card.

Just like a business, you need to prepare your financial statements atleast once a year or whenever you are about to make a huge financial commitment such as a loan.

Doing this will help you find out if you can afford to take a loan or take necessary measures to repay or manage your debts

There are two financial statements that you will need to prepare. i.e.

Once you have your financial statements, you will be able to use them to diagnose your financial health through financial ratios derived from the information on your financial statements.

The first Financial Statement you will prepare is the Personal Balance Sheet.

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