|
Your Personal Financial Report
The following is a reprint of an article published in our newsletter "Own Your Financial Future" on 18th July 2006.
Hi
In the last issue of this newsletter I noted that the start of a new financial year is a great time to reflect, review and reset our plans for financial independence. (If you missed the article you can read it here.)
At this time of year we are inundated with statements providing us with a summary of what has happened in our financial affairs over the past year. This information can have a far greater use than just helping us to complete our tax returns, or to fill our rubbish bins. Used wisely this information is gold.
When collated (quickly and easily) these annual statements provide you with a clear picture of your current financial health. Knowing where you are is an essential component of planning to reach and reaching your chosen destination.
Your Annual Report
At the end of each financial year large companies must collate a set of financial reports to inform their shareholders of their current status, plus any changes to previous years. This assists shareholders to make decisions as to the value of their investment.
You are the largest and most important shareholder in your financial future. Would you like to know how valuable your investment is?
I recommend that at least annually we each prepare the following financial reports for ourselves:
Download some templates to help you get started.
Your Financial Position
The value of personal balance sheet is that it tells us our net wealth. Our net wealth is the amount of money we have available to fund our lifestyle expenses without working. It is a measure of our financial independence.
The amount of assets you own is only one part of the story. You need to own more assets than the amount of debt that you also own (no that is not a misprint), and those assets need to be investment assets not lifestyle assets.
Your Cash Flow
Your cash flow statement tells you where your hard earned income is going. It is a big picture snap shot of how much of your “revenue” you’re investing in:
- Core living
- Discretionary living
- Debt repayment
- Your future
Since three of those four are easily quantifiable, the cash flow statement’s power is in illuminating how much discretion you are giving yourself.
The Information You’ll Need
To help you compile your annual accounts here is a list of some of the most common information we’ll all use:
- Group certificates from all employers
- Bank statements from 30June06 and 30Jun05
- Credit card statements for the whole year (especially if you spend most of your money using credit cards)
- Superannuation statement
- Loan statements
- Investment statements
- Tax return
You’ll generally be reading only one or two figures from each statement so it is quicker and easier than it may seem.
What do you see in the mirror?
Doing this the first time is illuminating. Even more powerful is to compare each year to previous years to track your journey. So keep this year’s accounts in a safe place (that you’ll remember).
The accounts act like a mirror.
- What do they tell you about your past year?
- What do they tell you about your current position compared to your goals?
- Do you like what you see?
- What could you do differently next year to paint an alternate picture?
- Will you need to seek some help?
You can now use this snap shot to help you to make informed decisions about your future.
Your lifestyle dreams are your destination.
Your financial plan is your map.
Your financial accounts are your landmarks along the journey.
As you travel, may you pass by the landmarks you intended to.
 Warm regards
Matt Hern
Read Part 3 of this three part series.
Home |
Terms of Use |
Privacy Policy |
Search This Site
Matt Hern trades as FINDRE
(Empowered Wealth Pty Ltd t/as)
ABN: 21 592 525 720
Phone: 08 9467 7320, Fax: 08 9463 7848
PO Box 259, Bull Creek, Perth, Western Australia 6149, Australia
Website: www.MattHern.com.au
Blog: www.Money-Guide.com.au
Add to Favourites
|
