Keeping Financial Statements
Do you know your net financial value? If you answered no, you are not alone. Almost anyone you ask have no clue what his or her net value is. That is, until you start asking an elite group of the rich and wealthy. Almost everyone who is working on a financial plan to become a millionaire have a financial statement so they can track their progress.
Financial statements are not difficult to do. When you can see what your net value is on paper, and watch your progress, this gives you an incentive to achieve more and the feeling of this achievement will help you keep on the road to financial success.
To start your financial statement, you only need to know a few basic accounting principals: Your assets minus your liabilities equal your net value. Assets are anything that you own that has a dollar value. To make your asset list simple, you should use only items that have a value over $1000.00. The most common assets include your home, bank accounts, retirement accounts, investment accounts, cars, jewelry, and any other items that have a monetary value.
Liabilities are any bills you owe that will not be paid off within a month. The reason for not including small monthly bills is to simplify the financial statement. The more simple the financial statement, the more likely you will spend the time to update one. Examples of liabilities are mortgage payments, car payments, credit card bills, and any other bills that amount to over $100.00.
Once you have your assets and liabilities compiled, it becomes a simple addition and subtraction process. You first list your assets and total them. Then you list your liabilities and total them. Once this is completed, you take the total assets and subtract the total liabilities and your total will be your net value. This process should only take fifteen to twenty minutes of time and the rewards are priceless.
An example of a financial statement is listed below:
Assets: 1/01/0000 6/01/0000
Home $200,000.00 $204,000.00
Cars $20,000.00 $19,000.00
Checking Acct: $1000.00 $1200.00
Pension $24,000.00 $24,500.00
Investments $15,000.00 $16,000.00
Jewelry $2000.00 $2000.00
Total Assets: $262,000.00 $266,700.00
Liabilities: 1/01/0000 6/01/0000
Mortgage $120,000.00 $118,000.00
Car Payments $5000.00 $4000.00
Credit Cards $1500.00 $1000.00
Total Liabilities: $126,500.00 $123,000.00
Total Assets: $262,000.00 $266,700.00
Total Liabilities: ($126,500.00) $(123,000.00)
Net Value: $135,500.00 $143,700.00
Net Increase: $8,200.00
By using the example above and adapting it to your situation, you can do a simple financial statement and watch your value grow. My suggestion is to create at least two financial statements per year, which will also allow you to adjust your spending or savings to help with the growth. You will find yourself getting excited to see where you are and how much closer you have come to financial security.