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How to Create a Personal Financial Statement

Byline profile imageWritten by Ashley Kilroy
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Byline profile imageEdited by Becca Stanek
Byline profile imageEdited by Arturo Conde, CEPF®
Updated on
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Assessing your financial situation can help you understand your options for creating a steadfast financial future. One tool that can assist in this assessment is a personal financial statement, which provides an overview of your financial circumstances. The process for how to create a personal financial statement first involves understanding the different components of one, as well as the ways you can use it. If you’d like hands-on guidance in creating a personal financial statement and using it to strategize your overall financial plan, consider enlisting the help of a financial advisor.

What Is a Personal Financial Statement?

A personal financial statement, or PFS, is a document or set of documents that outlines a person or family’s financial position. The balance sheet portion of a PFS exhibits your assets and liabilities, or net worth. Some people also include an income statement or other documents to create a more detailed PFS.

Having a PFS can be useful if you want to make a financial plan. These statements are usually goal-oriented and can help individuals and families in reaching their financial objectives. In particular, personal financial statements may benefit y young professionals who are just starting their financial journeys. If you’re new to financial planning, a PFS will help you understand your current position as well as your options for moving forward.

Another situation where a PFS is often used is when someone is taking out a personal loan. Lenders may ask a potential borrower to create a PFS to understand their debt-to-income ratio, which is a determining factor in the interest rate and loan amount that the borrower will receive.

How to Use a Personal Financial Statement

A personal financial statement is more than a static snapshot. It is a working tool that helps inform financial decisions, track progress and support long-term planning. Individuals use personal financial statements to understand their current financial position and assess whether their financial habits support their goals. This is especially useful when planning for milestones such as retirement, buying a home, funding education or launching a business.

Here are different ways you can employ a personal financial statement as part of your financial strategy.

Net Worth Tracking

One common use of a personal financial statement is monitoring net worth over time. By updating your assets and liabilities regularly, such as monthly or annually, you can observe financial trends, detect setbacks and measure overall growth. 

An increasing net worth can reflect healthy savings and debt reduction. On the other hand, a declining net worth may indicate spending issues, loss of income or falling asset values. Reviewing this data allows for more informed financial decisions.

Debt and Risk Assessment

The liabilities section of a personal financial statement highlights outstanding debts and financial obligations. A high level of consumer debt relative to assets or income may indicate a need for changes in spending, refinancing or revised financial planning. Lenders and advisors often use your debt-to-income ratio to evaluate creditworthiness and financial risk when you apply for a loan or mortgage, so it’s important to keep tabs on it.

Cash Flow Planning

If your PFS includes an income statement, that will  provide a view of your income sources and regular expenses. This helps you understand your monthly cash flow and identify how much money is available to save, invest or pay down debt. Reviewing spending patterns may also reveal areas where you can reduce costs or reallocate funds.

Goal Setting and Decision Support 

A personal financial statement is useful for setting financial goals. Whether the goal is to build an emergency fund, retire early or fund college tuition, a PFS helps determine if the necessary resources are in place. It can also highlight any gaps that may require additional savings or planning adjustments.

Financial Advisor Collaboration

Sharing a detailed PFS with a financial advisor gives them the context needed to offer personalized advice on topics such as investing, estate planning, insurance and taxes. Advisors may also use the data to run scenario analyses, such as the impact of retiring early or purchasing real estate. They can then evaluate how these decisions could affect your finances overall.

What to Include in a Personal Financial Statement

There are two core sections of any PFS:

  • Balance sheet: Your balance sheet will include all of your assets and liabilities. This may include your home, mortgage, car, auto loan, taxes, savings accounts, investment accounts, credit card balances and more. Note that the balance sheet does not include cash flow but does include the total amounts due or the total value of each account.
  • Income statement: Your income statement will include your salary, bonuses and commissions. It may also include any dividends and interest earned, gig income or other sources of income. Additionally, it will show steady cash outflows, such as income taxes, insurance premiums and other regular payments that detract from your income.

What to Exclude From Your Personal Financial Statement

A man creating a personal financial statement.

There are several things that you will not include in your PFS. If you own a business or have business-related assets and liabilities, for instance, you would not include those on your PFS, unless you are directly responsible for the costs. An example of this would be if you are taking out a personal loan for your business.

Small personal property assets, such as furniture and household goods, are also not typically included in a PFS. Rented items are also generally not part of a PFS, as they are not part of your net worth. However, if you own a space and rent it out to someone else, the rent you collect is considered income and would be included in a personal financial statement.

Example of a Personal Financial Statement

Now that you understand what a personal financial statement is and why it’s important, let’s look at an example. 

Take, for example, a young professional who wants to start planning for retirement. She has started saving with her company’s 401(k) match, purchased her first home and has a car. However, she wants to be sure that she is set up well for retirement, so her financial advisor has asked her to prepare a PFS to understand where she stands currently.

Her home is worth $200,000, and the car she drives is worth $30,000. After several years of hard work, she has $60,000 in investments and 401(k) funds, and she keeps about $5,000 in an emergency fund. Her assets total $295,000.

For liabilities, she owes $150,000 on her home and $10,000 on her car. Additionally, she has about $3,000 in credit card debt. Each month, she pays the minimum amount due on each liability. . Her liabilities total $163,000.

Her assets are worth $295,000 but she owes a total of $163,000. Therefore, when we subtract her liabilities from her assets, we determine her net worth is $132,000.

Bottom Line

A personal financial statement can help you keep track of your money.

A personal financial statement supports informed decision-making and long-term financial discipline. When updated consistently, it can help you stay aligned with your financial goals and reduce the likelihood of unexpected setbacks. Common uses for a PFS include setting and tracking towards financial goals as well as providing more detailed information to a financial institution, such as a lender, or to a financial advisor. It helps both the individual and the financial institution understand the person’s financial responsibility and what their options are moving forward.

Tips for Building a Personal Financial Statement

  • Consider talking to a financial advisor about creating your own personal financial statement. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • Part of getting your personal finances in order is to be aware of common misconceptions about the subject. Knowing the ones that appear most frequently will help you avoid such mistakes. If one of your personal financial goals is stability, be sure to follow the 10 most important steps to that goal.

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