Personal Income Statement Template, Plus How to Make One

what is a personal income statement

On the other hand, if your net worth keeps on deteriorating due to your expenditure, you will have a negative net worth due to debts. A cash flow statement also gives you some insight into the amount of money that you can save monthly. Once you subtract the total amount of money that you spend on expenses, you will get some insight into the amount of money that you can save or invest.

what is a personal income statement

Learn how to create a personal income statement to keep an eye on your cash flow and decide how to adjust your budget and financial plans. A personal financial statement shows an individual’s assets, liabilities, income, and expenses. It can help to identify areas of financial strength and weakness and to track progress over time. It is important because it provides a snapshot of an individual’s financial situation at a particular point in time.

How Does a Personal Financial Statement Work?

Luckily, with’s visually-appealing templates and rich-media embedding features, you can create a smart personal financial statement with ease. On the contrary, the balance sheet gives you a sneak peek into what you own and what you owe. Firstly, let’s explore why you should create a personal financial statement in the first place.

what is a personal income statement

Your credit card and debit card history can also give you an insight into your monthly expenses. Once you go through your credit card and debit card history, you will be able to track the amount of money you spent on various expenses. We excluded payments made to cover minimum payments to cards with a lower APR than Tally or to cards that were in a grace period at the time of payment.

How can income statements help you understand your financial position?

At Finance Strategists, we partner with financial experts to ensure the accuracy of our financial content. The articles and research support materials available on this site are educational and are not intended to be investment or tax advice. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. They also provide an idea of possible deductions that can be made to lower an individual’s tax rate.

  • This statement is goal-oriented and helps you reach your financial objectives.
  • After subtracting expenses from income, Jeffrey has a net income of $5,590.
  • In business, an income statement shows a company’s revenues and expenses during a certain period.

For example, if you increase the frequency of your car trips, you might spend more money on a variable expense like fuel. Similarly, if you are hosting your friends at your home, you might spend more money on food and drinks. Portfolio income is the amount of money that you get from your investment asset. 6 The portion of your credit line that can be paid to your cards will be reduced by the amount of the annual fee.

A personal financial statement is broken down into assets and liabilities. Assets include the value of securities and funds held in checking or savings accounts, retirement account balances, trading accounts, and real estate. Liabilities include any debts the individual may have including personal loans, credit cards, student loans, unpaid taxes, and mortgages. Married couples may create joint personal financial statements by combining their assets and liabilities. The term “personal financial statement” refers to the summary of an individual’s financial position at a particular time. Typically, the document includes general information about the individual and a summary of the financial position in terms of total assets and liabilities and net income flow.

Step 2: List All Your Debt

If the individual has more assets than liabilities, they end up with a positive net worth. If you’re borrowing a lot of money with credit cards, you may consider using tools to help you pay down your credit card debt. Tally helps you pay down higher-interest credit card debt quickly and efficiently with a lower-interest line of credit, improving your overall financial health. For instance, let’s say that your salary plus themoney you earn from a side hustle yields a net profit of $300 monthly. On the other hand, you have minimal money in savings, a new car loan and credit card debt.

Even if you have a positive net worth, it is not guaranteed you will receive a loan you apply for. Credit history and past debts are also taken into consideration by lenders. In this example, we’ve stated you’ve paid off all your debt except your mortgage, so that’s the only thing listed here.

Plus, this personal financial statement also helps you create a budget and cut down on extra costs. They would list all their assets—$20,000 for a car, $200,000 for their house, $300,000 in investments, and $50,000 in cash and equivalents. They also owns some highly collectible stamps and art valued at $20,000 that they can list.

  • If you take this route, try to find one for personal finances and not for small business owners, as the categories listed may not apply to you.
  • A personal financial statement helps you take a hard look at your income, expenses, assets, and liabilities.
  • Add the amount of money that you get once income taxes are deducted from your gross salary.
  • By the end of this article, you should have a better idea of how you can implement income statements into your financial management strategy.

On the other hand, if you have a negative cash flow, you are spending more money than your net income. This might increase the credit card debt that you owe to different organizations or companies. With this personal financial statement, you can easily know how your net worth is affected by your spending habits. Your net worth is the difference between your total assets and liabilities. A personal income financial statement lists income from various sources (salaries, dividends, and profits from bonds or stocks). This personal financial statement also contains all the living expenses that you might incur over time such as rent, utility payments, and mortgage payments.

On the contrary, if you have a net loss, you may have to tap into a savings fund or borrow money to pay expenses. While this may happen occasionally — rainy day and emergency funds exist for a reason, after all — it’s problematic if it occurs routinely. Having a net loss for a few periods in a row may result in debt, which can become difficult to repay because of interest.

Download the Free Template

You should strive to have a positive cash flow and a positive net worth. On the other hand, a negative cash flow and a negative net worth is the worst scenario that you can find yourself in. Multiple types of personal financial statement templates are available, and the one provided below is one of the simplest versions, which can be easily understood. However, individuals can use a more complicated and detailed version based on their requirements. Taken together, Jeffrey’s balance sheet and income statement provide useful information about his current financial situation.

So, effectively, expense heads represent anything that takes away money. To set up your personal income statement, define the period you want to analyze. If you’re someone who needs to monitor spending or is working toward a specific goal, you may consider producing a monthly statement. If you have a history of positive cash flows and net worth, you may only need to look at your statement quarterly or annually. For the sake of discussion, let’s assume you choose a monthly personal income statement.

It can help to identify areas where expenses may be excessive or where there is room to make cuts in order to save money. The statement can also be used to track progress toward financial goals. The financial statement contains a section known as a balance sheet, which summarizes a person’s assets, including cash and investments, and liabilities like debts or loans.

Earned income is paid for the value that you offer or create by providing your services. Examples of earned income include tips, salaries, wages, commissions, and bonuses. This type of income can be earned from a corporate job or a self-employment job.

Talk to a SCORE mentor online or in person to get free assistance and advice. Your net worth can be either positive (if you have more assets than liabilities) or negative (if you have more liabilities than assets). Such info can help you assess the amount of money that you spend on different expenses. While tracking such expenses can be quite challenging, you can refer to the different receipts that were issued to you as you were paying for such expenses. Passive income is the money that you earn with minimal effort from the resources that you have invested in.

You can use your excess income to pay down debt and work toward achieving a positive net worth. A positive net income indicates that the individual earned more than they spent, which adds to the net worth, resulting in an improved financial position. On the other hand, a negative net income means that the individual spent more than what they earned, which results in a deterioration of financial position.