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Assets, Liabilities, Income and expenses – analyzing what we have financially effectively and honestly can be a confusing task but integral in order to assess where a person is financially and their ability to accomplish their financial goals. Planning properly requires more than black and white numbers on a page – understanding how these numbers relate to and impact your Financial Plan. This is an often overlooked portion of building a sound Financial Plan by many people but is a huge part of the data gathering process done by Financial Planning Professionals and an insightful financial advisor can utilize details found in both to assist them in helping you reach your goals.
The Net Worth Statement is comprised of assets, liabilities and net worth. In laymen's terms – what you own, what you owe and the all-important Net worth figure (determined by subtracting the total liabilities from the total assets. Once a net worth figure is determined the financial flexibility or lack thereof can be determined.
The Cash Flow Statement reveals inflows and outflows of your money. It illuminates spending patterns and areas that may be able to be improved upon or utilized in order to reach your goals. Cash Flow Statements often give Financial Planners and their clients the most reliable information regarding spending patterns and financial health.
In short, these documents can answer the question of where your money is going and how it can better serve your future goals. A Financial Planning Professional can assist you in forming these statements and evaluating them in order to begin formulating your Financial Plan. Contact us to schedule an appointment and evaluate your financial health today.