Most of us have heard about assets and liabilities. This 2 term is important in our finance. Without knowing this, our finance will getting worst and our money can’t be manage. In simple definition assets and liabilities means ‘what you own and what you owe’. How much money you have and how much money there is left after that.
When doing this, two types of personal financial statements come in handy :-
- Your personal balance sheet
- Your cash flow statement
These financial statements will help you to :-
- Provide information about current financial position and a summary of your income and expenditure
- Measure your progress in meeting your short-term, medium-term and long-term financial goals
- Maintain information about your financial activities, such as investments and spending patterns
- Provide data you can use when preparing tax forms or applying for a bank loan
Personal balance sheet
Personal balance sheet is your financial scorecard which you can use to regularly assess your financial standing. It can be a reference point in making money-related decision.
Your personal balance sheet reports on what you own and what you owe:
- What you own (assets) – Include items such as cash, savings, real estate, unit trusts or shares in companies
- What you owe (liabilities) – Include all types of loans, whether to your bank, family or friends as well as credit card debt and payments that are due such as house rental and utility bills.
How about that? It is a basic simple information about assets and liabilities. The important word is what we own and what we owe. Hopefully it could help you.