Create A Financial Statement

How To Create A Winning Financial StatementCredit: Free Stock Photos


Why Create A Financial Statement?

Understanding how to create and use a financial statement is the first step in running your home finances successfully. A financial statement is a document that helps you see what income you have coming in and how much money you have going out in expenses. This is very helpful because there is a lot of money lost because of recording errors. Most people don't record their finances at all so keeping this statement up to date is putting you ahead of the curve.

How To Make A Financial Statement

There are two parts to a financial statement. Income and expenses. These two are both placed on the statement. Income on top and expenses on the bottom. Subtract one from the other and then the total number that is left over is the positive or negative profit.

Listed below is a simple format of how to create a financial statement and a little explanation of each. In order to use this, all you have to do is transfer the bolded sections of this text below to another sheet of paper and add you own personal numbers.

Financial Statement (Income)

  • Earned Income - This is any income that you earn from a job.
  • Passive Income - This is income from a business or real estate that you own and do not work at.
  • Portfolio Income - This includes stocks, bonds, and royalties.

Add these together and you get your total monthly income.

Financial Statement (Expenses)

  • Taxes - Write down all the taxes you pay including what comes out of your pay check.
  • Mortgage or rent - This is the payment you make for your lodging.
  • Utilities - This is the payments you make for electricity, water, etc.
  • Maintenance - This would be items like fixing you house or backyard. Your fence or appliances would be another example.
  • Food and clothing - Any money you spend on food or clothing goes here.
  • Other expenses - Misc. items
  • Tithing - This is what you give at church or you could put charity donations as well.
  • Insurance - Put all your different insurance payments down.
  • Credit card - Write down your credit card payment amounts here.
  • Car loan - This is where you put down your car payment.
  • Student loan - This is where you put all your student loan  payments.

Add these together and you will get your monthly expenses.

Financial Statement (Cashflow)

Next, subtract expenses from income and that will give you your net monthly income. This is how to create a cashflow statement which is part of a financial statement.