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What is a personal financial system ?

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A personal financial statement simply details your personal finances in an easy to understand format. This is a vital document for anyone seeking a company loan application. It lets potential lenders quickly glean all of your assets, liabilities and income. Additionally, if you’re married, your partner’s assets and debts can also be included on your personal financial statement.

In order to create your personal financial statement, you will need your last year’s income tax returns, copies of all of your recent bank statements and pay stubs, and your social security card. You may also need to provide documentation such as your driver’s license, utility bills, credit cards and other bills, if applicable. Your statement will contain the following information: total annual income, number of full-time employees, total number of hours worked, whether you’re self-employed or not, and whether you’re a sole proprietor partnership or corporation. It will also contain any investment accounts, retirement funds, stocks, bonds, bank accounts, CDs or money market accounts.

To prepare your personal financial statement, you’ll need to obtain all of your financial documents that are relevant to your needs. This includes any tax returns, canceled checks or receipts, stock certificates, investment securities, personal loans or promissory notes, and insurance policies. Review each document to ensure it is correct. If some of your financial documents are missing, you’ll need to obtain replacements. Contact the lender that holds the bank account or business loan that you’re reviewing for additional information on what is needed to complete your application.

Now that you have all of your financial documents ready and waiting, you can begin to work through them. First, list all of your expenses. Include transportation, meals, and amusement expenses as well as your everyday personal expenses such as haircuts, gasoline, shopping, and other basic household expenses. Locate your business income as well as other sources of income and expenses. For example, did you earn any rental income from your rental property? If so, include that income on your personal financial statement as well.

Now, turn to your personal financial statement to determine your potential for financial freedom. Net worth is the value you place in your net worth (the total amount of all of your debts less any current assets). For example, if you owe money on a home mortgage, that debt is included in your net worth. Likewise, if you have an interest only mortgage, that debt is also included. Net worth is a key component in your long term financial life goal and should be reviewed often to keep you on track toward financial freedom.

You next will want to take a look at your personal financial statement to determine what your cash flow situation looks like. The cash flow situation is basically your ability to meet both short term and long term obligations with cash on hand. Many people don’t really think about this in their personal financial statements, but it is a vital element to overall living expenses and wealth. In the business world, cash flow can lead to success or failure. When planning your financial freedom, don’t ignore this critical aspect of your personal financial statement.

Finally, review your personal financial statement one more time to make sure all of the balances shown are accurate. You may have a few odd marks here and there, but this is normal. Review the account headings to see which balance sheets show your cash flow situation. If there is a discrepancy between your accounts, you may want to contact your bank and have them address the problem. They may be able to work something out with you or just have you re-evaluate your spending habits to find that your spending isn’t really what you thought it was. This is one of the most important factors to fixing your spending problem, so don’t overlook it.

Your personal financial statement can give you a very positive picture of your overall health, wealth, and life style if you have a healthy and steady income from regular jobs and regular savings. If you have any negative debts, such as credit card debts, they will also negatively affect your picture. Review your accounts and take steps to get rid of any debts you can so that you have a solid history of positive cash flow. If you find that your debts are dragging your score down, see if you can get a debt consolidation loan to consolidate those debts and bring them into the clear.

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