How much are yo

How much are you worth? Many self-made business people, famously including Robert Kiyosaki in his best-selling blockbuster "Rich Dad's Prophecy, " emphasize the importance of creating a personal financial statement to help the entrepreneur track their income and change in net worth. At their simplest, personal financial statements include a statement of net worth and a cash-based statement of income. If you run your own business or you are an independent contractor you should already track income and expenses, perhaps on software such as Quicken or Mint because, at the minimum, you will need them to prepare your tax returns. By preparing your statement of net worth along with it you are giving yourself a powerful tool to help you understand if you're getting richer or poorer and why. Read on for more information on why personal financial statements are such powerful tools, and how to prepare them.single audit 

Top 5 reasons for preparing your personal financial statements at least once a year:

You can keep track of all your investments in one place. If you're like me then you have a 401(k), the wife a 403(b), an IRA, and a few miscellaneous investments in comic books, antique chamber pots, and real estate in third world countries all on separate reports. I like to put their values all on one financial report each year to get an idea how my portfolio is performing as a whole. This way, if i am assassinated in the night by anti-capitalist accountant-haters, my wife will have a summary of our assets or, if i live, I can see if we need to do some diversification of the family portfolio into say, cocoa bean futures or works of art by minor Midwestern celebrities.

In case someone wants to see them. For example, if you are applying for a loan with the Small business Administration, if you are about to take on a business partner, or if you are engaged to be married and are about to ask your future father-in-law for permission then there are people who would be very interested in seeing what your resources are and how responsible you are in managing them!

To examine where the money is coming from and where it is going. This is a hard look at the income side of the statement. I like to put my expenses into categories and compare how much I am spending in each category from one year to the next. That way, if i notice a big increase in a certain category, say "Wife's Boyfriend, " I can nip that excess spending in the bud before it gets out of hand!

It can be the basis for preparing the budget for the next year, or for making goals for the next year. My wife and i are saving to buy a piece of property in Costa Rica and we need the cash by August. Using this years budget we projected the cash we would normally have by then and then made some adjustments (she and I working harder and us all tightening the belt) to get to the necessary sum. If we didn't have this information then we would be flying blind, with only a vague guess as to how much we could reasonably expect to have.

Celebrity endorsements; Robert Kiyosaki, in his book Rich Dad's Prophecy, says about personal financial statements "all through this book, I refer to financial greats such as Warren Buffett, America's richest investor, Alan Greenspan, chairman of the powerful Federal Reserve Board, and Paul O'Neill, the secretary of the treasury, who all say basically the same thing my rich dad said to me. All of these financially smart men stress the importance of financial literacy and that financial literacy begins with a financial statement. None of these men said start with real estate, savings, a business, tax liens, stocks, day trading, options trading, or mutual funds, which is where most people start building their arks... and that is why so many arks cannot stand rough seas. " Wow, not only does Robert recommend them, he implies that Warren Buffet, Alan Greenspan, and Paul O'Neill do as well!