In the recent past, I have covered “Choosing the Right Budgeting System For You”, “Budgeting Revisited” and “Personal Financial System” which are all major money management activities. Here I will cover a third activity which is “creating your personal financial statement.” These three money management activities are interrelated as shown below
Creating your personal financial statements mean doing two documents namely a personal balance sheet and a cash flow statement. What do you get from doing the two documents? You get or learn the following
• Current net worth or financial position as you know your total assets and liabilities
• Keep track of your progress in meeting your financial goals
• Stay on top of all financial activities
• Have ready data at your fingertips
Instead of giving an explanation on how to create a personal balance sheet, below is an example of one belonging to a young fictitious couple Mr. and Mrs. ABC.
A further note on “Investment assets”, these are funds you put aside for the future. It is used to support your long-term financial needs such as financing your child’s education and funding for your retirement.
Someone who has a high or positive net worth may still face financial difficulties if he has many assets but has low liquidity. He may not have enough cash to meet his current expenses or liabilities.
Jacquelyn is the co-author of the books “Teaching Your Kids About Money” and “Top 93 Personal Finance FAQs in Malaysia” with KC Lau. Jacquelyn is the pseudonym used by Amy Sipagal.