By Eric Woodruff, CPA, CCIFP
Partner, Audit & Assurance Services
[email protected]
While you’re analyzing your business goals and objectives for next year, don’t forget about your personal financial condition at home as well. Many times, personal finances are the most often ignored aspect of very busy business owners’ lives.
Preparing a personal financial statement on an annual basis is of vital importance. Avoiding this assessment of your personal financial condition puts you and your family at risk of financial instability. You should not only prepare it but also analyze it and make sure your personal assets and level of liabilities are consistent with your goals and objectives. Oftentimes people don’t want to prepare it, as they are fearful of what it might tell them. You must face reality.
If you’re not accustomed to organizing your finances in this manner, start by thinking of it as a simple inventory. It all boils down to keeping track of what you own and what you owe. What debts are lurking? Credit card and home mortgages? Money borrowed for business ventures? Are these at a level that is prudent and commensurate with your personal cash flow?
Many people lack a clear understanding of net worth, which is basically every significant thing of value that you own (assets) minus your debts (liabilities). Assets include your home and any other real estate as well as cash, investments, cars, etc.
Think about what will provide you financial security in the future. Is it time to start making (or increasing) 401k contributions or simply setting aside more emergency funds in a savings account? It’s easy to get caught up in the habit of living paycheck to paycheck. Spending can easily be more tempting and FUN than saving. But, down the line, you’ll definitely be glad you SAVED.
Keeping a close eye on your personal finances and taking an annual, in-depth look at your financial condition will not only improve your financial stability, but it will also provide peace of mind.
If we can assist you further with achieving success in your business or personal financial matters, please reach out to us. We can also assist you in preparing your personal financial statement and consult with you to interpret your financial condition, to ascertain if you are on the path that you have planned for. Please call Eric Woodruff at (317) 613-7850 or email [email protected].