How To Build A Personal Financial Statement
Associates,Alright, I know the critics and realists are itching to get to some practicality after the past two weeks of light and fluffy dreaming in our newsletter. Don't worry, this should be plenty to quench your hankerin' for numbers and financial education. Lets get practical. Updates: We're up to 61 subscribers folks! We are growing and that is great, but I can't do this alone. Would you forward this email to 5 of your friends today? Thanks in advance! HELPFUL LINKS
TAKE AN ACCOUNT 💰(Intro To Financial Statements) Two authors have majorly impacted my financial life, with concepts so simple yet so revolutionary. The first is Robert Kiyosaki. No, not the motorcycle brand, but the author of the all-time best-selling personal finance book: “Rich Dad, Poor Dad.” I was 16 or 17 years old when I found it. A dumpster diver at heart, one day I was knee-deep in an Alaskan dumpster when I saw the cover of You Can Choose To Be Rich in yellow and purple, abandoned amidst a heap of trash. This piqued my interest, so I grabbed it. The author looked familiar... I had seen his name before... The financial concepts it unearthed changed my life forever. Robert used simple, yet profound diagrams to explain the way different types of people handle money. He taught using words I had never been exposed to before. Words like “Assets” and “Liabilities.” Assets put money in your pocket whether you work or not. He defined each with language that a child could understand, demystifying financial literacy with just 6 words: Income, Expense, Asset, Liability, and Cash Flow. Each was depicted in his diagram of a financial statement that took complex accounting principles and made them easy to comprehend. This was my first exposure to the concept of a financial statement and my “first step into a larger world” of financial education. Years later, I stumbled upon a second author who built on some of the financial concepts taught in Rich Dad, Poor Dad. Hans Johnson, in True Wealth Formula, teaches a powerful wealth-building strategy. Ratios, rules-based systems for income management and investing... it's a gold mine. Check it out here, if you haven’t already read it: #1 RECOMMENDED WEALTH BOOK (And if you have read it, read it again. I have personally read it multiple times and will continue to do so because its just that good.) On the topic of financial statements, TWF teaches this: YOU are the number one asset on your balance sheet. You are your biggest asset. He had me list out what I already had, all in one place. Income sources, cash, credit, credit card points & miles, credit score... And that's what I want you to do for yourself. Jesus even tells us that you'll be the laughingstock of the village if you don't take an account. So, here are some practical insights on how to build a personal balance sheet. What’s a Personal Balance Sheet, Anyway?Think of it as a list of your assets (what you have) and liabilities (what’s holding you back). This isn’t just about dollars and cents. Your real value goes beyond your bank balance, as you'll see in the steps below. When you know your assets, you can leverage them. When you’re clear on your liabilities, you can start reducing them. And that’s the sweet spot—balancing the equation so you can move toward creating your vision faster. Step 1: List Your AssetsStart by writing down all your assets. Think beyond just money in the bank:
These are the things that add value to your life. Spend 10 minutes listing everything out—really dig deep to uncover assets you might be overlooking. Step 2: Identify Your LiabilitiesNow, be honest with yourself and list out all your liabilities:
This part can be tough, but it’s crucial to know what’s dragging you down so you can make a plan to overcome it. Step 3: Calculate your Net WorthWith your assets and liabilities listed, it’s time to calculate your net worth: Net Worth = Total Assets - Total Liabilities Now that you have a clear picture, ask yourself:
This equation will help you to identify what your current trajectory is in your life. It may actually be disheartening if you have a negative net worth, but understand this: until we know where you are, we can't get you where you want to go. Keep It Simple, Keep It ConsistentThis isn’t a one-time task. Revisit your financial statement every few months and adjust as needed. Consistency is key to staying on track and building momentum towards achieving your vision. Till next time, -Jonathan P.S. P.P.S. If you're ready to take control of your finances and start turning dreams into reality, I’ve got something waiting for you. As part of The Associate Community, you get access to my “Initiation” course absolutely free during a 14-day trial. No hidden catches, no fine print. We’ve been talking about building your personal financial statement, taking control over your finances, as well as getting started building a portfolio of cash-flowing assets—all with the support of a like-minded community, live calls, and hands-on resources. |