Unless you’re super organized, a complete portrait of your personal finances probably floats around in your head. This is fine for most people as long as your finances are simple. Sometimes, however, you’ll need to draw up a personal finance statement when you want to do something like start your own business.
If you’re wondering what a personal finance statement is, then you’re in luck! Read on to learn everything you need to know about it!
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What Is a Personal Finance Statement?
A personal finance statement is a form document that you draft that gives all of the details about your current financial situation. It allows lenders and investors to get an idea of the total amount of debt you owe versus the total amount of assets you have. If you are married, then you may be required to include your spouse’s financial information on this document as well.
The sum total of your assets and liabilities is termed your net worth. If your debts exceed your assets, then you have a negative net worth and vice versa.
How Does It Work?
A personal finance statement comes into play when you are trying to obtain financing for your business. Many lenders will ask that you personally guarantee at least a portion of the loan by pledging some of your assets. In those cases, the lender will request that you provide a detailed personal financial statement.
What kind of assets can you pledge? It depends!
Some people will pledge the contents of their 401k or IRA. In those cases, you’ll need to detail the value of the asset and list where it is held.
How Do I Prepare One?
Preparing a personal finance statement is a standard process. You’ll divide your assets by placing them in the left column and liabilities in the right column. Your total net worth is listed on the right side of the statement.
Many personal finance statements include supporting documentation like recent paystubs. If your employer hasn’t issued you paystubs, then talk to them about it. Employers can make check stubs in 5 minutes, so it’s not a huge imposition.
Other assets to list include your checking and savings accounts, retirement accounts, your mortgage information, and your car loan. If you have other assets like high-value personal property, you can list those items as well.
List all debts you have, including debts in which you are a co-signer. This can mean credit card debt, student loans, and any judgments in your name.
Are You Ready to Take Control of Your Finances?
A personal finance statement allows you and lenders to glance at your financial wellbeing. They are often included along with your business plan or loan request to get your business going. Be sure to make your statement as transparent and easy to understand as possible to maximize your chances of getting your business off the ground. Are you looking for dubai vat registration then read more how to apply for VAT registration in UAE.
Are you looking for more great advice that’ll help you make your new business a huge success? Look no further! Check out the rest of our blog for tons of helpful articles about everything from personal finance to business tips!
