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Many people never take the time to understand their finances. Yet, they complain and react without taking time to set goals and make plans to achieve them. Sitting down and analyzing your income, spending, savings, investments, to check whether or not you are on track to meet your financial goals is something everyone should learn to often do.
Below are three common financial statements and how you can use them in the pursuit of personal finance success:
Income Statement
One of the most important tools to have in personal finance is a budget. Your budget isn’t a restriction on what you spend, it is a tool to plan for your income and spending to ensure you reach your financial goals.
This Income statement is also known as a profit and loss statement or P&L, and it is the most important tool you can use for your own financial planning.
Balance Sheet
Big businesses use a By looking at your own personal balance sheet at least once a month, you are able to understand and calculate your net worth just like big companies use a balance sheet to understand their assets, liabilities, and shareholder’s equity.
Cash Flow Statement
A cash flow statement has an important role in your personal finance statements. This statement tells you where your money comes from and goes to within three major categories: operating, investing, and financing. Looking at your finances from this angle shows you how each part of your finances is working independently of the others.
When you spend time to understand your finances, you will get to know where to focus and work in the future.
Good luck!
