2.02 - Personal Financial Statements

Question 1

What are the two key personal financial statements used for personal financial planning? What is their purpose?

Answer 1

The Net Worth Statement (personal balance sheet) and the Cash Flow statement (budget). The Net Worth statement is a financial snapshot in time, which progress can be tracked against it, whereas the Cash Flow statement describes in/outflows of cash over a specific period (typically one month)

Question 2

How do you calculate net worth?

Answer 2

Net worth = assets - liabilities

Question 3

How do you calculate personal savings rate?

Savings / Net Income (after taxes, CPP, EI, RPP, union dues, etc…)

Answer 3

Personal savings rate = savings / net Income (after taxes, CPP, EI, RPP, union dues, etc…)