101 About your Personal Finance Statements

When you want to apply for a business loan, the personal financial statement becomes crucial. The personal financial statement comprises of many sections. You need to be aware of these pieces of information. Thus, your loan application will become faster, and the chances of it getting approved increases.

By definition, the personal financial statement carries details about your debts and liabilities. It also holds information about your net worth. The equation for calculating your net worth is, assets minus “total liabilities”. Married couples need to present a combined financial statement. When it comes to identifying your assets, it could be anything like your home and cars. On the other hand, liabilities include your loans and credit cards.

Let’s understand your net worth, with an example. If you have 100,000 USD worth assets. And, a loan worth 75,000 USD – your net worth is 25,000 USD. The net worth of an individual is quite similar to an owner’s equity in the business. When you find the difference between liabilities and assets in your company, it becomes a balance sheet.

If you have rental agreements against your name, they will not be a part of the personal financial statement. That is because, you don’t own the car or property.

Do you need a personal financial statement?

Many times, when you want to borrow money from a financial institution, you will be asked for this document. Collateral loans require a personal financial statement. In some cases, you will be asked to pledge an asset on behalf of the loan. The asset acts as a guarantee to the mortgage. Meanwhile, the personal financial statement serves as a discrete record of all your assets. It helps the lender gain a better understanding of your finances. Before a loan is sanctioned, it is important for the lender to know all about your finances.

How does the personal financial statement look like?

Just like any traditional balance sheet, these documents have two columns. The left column carries details about your assets. And, the right column focuses on your liabilities. Your net worth is calculated on the right. This balances the entire equation.

Additional Details

Some personal financial statement formats will expect you to enter details about your annual income and expenses. Ensure that the values entered the match with your income tax returns. This includes your insurance payments, mortgage payments, alimony, and other taxable income (or expenses).