How to Create a Personal Financial Statement

When applying for a home loan, banks often require a detailed financial statement. 

Let’s simplify this: imagine you have assets worth ₹12,50,000, including fixed deposits, stocks, and savings. From this, subtract your debts, like a car loan and a personal loan totaling ₹6,50,000, which leaves you with a net worth of ₹6,00,000. 

In India, having this net worth means you are wealthier than many, as the median wealth per adult is only ₹3.1 lakh.

A clear financial statement can greatly influence your securing an online SBI personal loan. Ready to learn more? Follow these steps.

Understanding the Components of a Personal Financial Statement

A personal financial statement has three main parts: assets, liabilities, and net worth. Think of it like a balance sheet for your personal finances.

Assets are what you own. These include cash, real estate, stocks, and investments. For example:

Liabilities are what you owe. These include loans, credit card dues, and EMIs.

Net worth is calculated as:
Net Worth = Total Assets – Total Liabilities

For instance, if your total liabilities are ₹15,00,000, your net worth is ₹50,50,000 (₹65,50,000 – ₹15,00,000).

Step-by-Step Guide to Creating a Personal Financial Statement

To create an effective statement, follow these steps:

1. List All Assets
   Include liquid assets like cash or fixed deposits, and non-liquid assets like property or jewellery.
2. List All Liabilities
   Add up all your loans, credit card balances, and any pending dues.
3. Calculate Net Worth
   Subtract liabilities from assets. For example:
   Assets: ₹20,00,000
   Liabilities: ₹5,00,000
   Net Worth: ₹15,00,000
4. Review Regularly
   Update your statement monthly or after any significant financial changes.

Tools and Templates for Simplifying the Process

You don’t need fancy tools. A spreadsheet can do the job! But there are free online templates and apps for convenience. Here are some examples:

• Microsoft Excel Templates
• Google Sheets
• Quicken – Offers detailed expense tracking and budgeting features to manage your finances efficiently.
• Mint – Integrates with your bank accounts for real-time updates on your financial status.
• YNAB (You Need A Budget) – Helps in allocating every dollar you earn, focusing on managing expenses effectively.
• Tiller Money – Automates your financial data in Google Sheets and Microsoft Excel for daily updates.
• EveryDollar – A budgeting tool designed for zero-based budgeting that helps you assign every dollar a job.
• Personal Capital – Provides tools for a comprehensive view of your net worth and assists with investment management.

Mistakes to Avoid

Creating a personal financial statement is simple, but these mistakes can derail your efforts:

• Overestimating asset values.
• Forgetting hidden liabilities like credit card dues.
• Ignoring depreciation on vehicles.

Always double-check your calculations and ensure they’re updated.

Common Questions and Real-Life Scenarios

• What if I have an irregular income? Track monthly averages and note fluctuations.
• How do I include my gold jewellery? Use current market value but account for purity.
• Should I include unpaid EMIs? Yes, they’re part of your liabilities.
• How does this help with loans? Lenders, like those for online SBI personal loans, assess your financial health through your net worth.

Conclusion

A personal financial statement is not just for banks; it’s for you. It helps you understand where you stand and plan for a better future. For instance, if your net worth is positive, you’re in a good spot. If negative, you know where to cut back.

As you work on your finances, keep it updated. Banks, especially when you’re applying for an online SBI personal loan, want clarity and accuracy.

Now, are you ready to take control of your finances?

FAQs

1. How do I calculate my net worth?
   Subtract liabilities from total assets.
2. Can I use my financial statement for loan applications?
   Yes, it’s often required, especially for online SBI personal loans.
3. What if I forget a liability?
   Update the statement immediately. Accuracy is key.
4. How often should I review my financial statement?
   Monthly or after any major financial change.