What is a financial statement and how do I create one for my family expenses? How will creating a financial statement help me budget and plan for my family’s future better?

This is a question that I am asked quite often.

Let me answer it like this:

There are various financial statements that an individual can make or must make. I will enumerate them here – some of them are MUST BE MADE, some are NICE TO BE MADE and some can make your life smooth:

– Goals statement: tells you your written financial goals, the path, and the time that it will take to achieve the end result.

–Income statement: Tells you what you earn – and from where- your business income, dividend income, interest income….etc. Looks easy on paper especially for a person with a salary income, it can be complicated for a business man!

Balance sheet: shows the asset and liabilities of a person as on a particular day.

Expenses Budget statement:  This tells you what expenses you are likely to incur in the next period – say a month, a quarter or a year. It is the estimate that you will incur – the more detailed it is, it is difficult to make. However when you compare it with the actual expenditure, you will know what you had estimated and what is actually being incurred.

Assets statement: A statement of your assets – could be all your mutual funds, shares, life insurance policies….etc.

Liabilities statement: a statement of all your loans – auto, home, …and what have you!

can really go on and on…all the abovementioned statements are very useful..albeit a little painful to create..