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Looking back at your finances in the past year help you see where you need to make necessary changes to improve or enhance your financial future. Not only should your year-end financial checklist include an honest assessment of your debts, but you should also assess your investments and your life, health and homeowner’s insurance policies.

Debt

List your debt obligations, such as credit cards and loans that you want to pay off or pay down in the upcoming year. Consider consolidating high-interest rate credit cards to lower-rate cards to save money on interest payments. Then look at your monthly income and estimate how much extra you can pay beyond the minimum payment.

For your mortgage debt, look at whether you are eligible to cancel your private mortgage insurance or PMI. PMI cancellation eligibility generally occurs when your outstanding mortgage balance is 78 percent or less than the original property value.

Investments

When looking at your investment portfolio, you want to consider rebalancing your assets to make sure it is still suitable for you in the upcoming year. Those reaching retirement age may want to move some of their assets out of medium or high-risk investments into lower-risk investments. You also may want to consider selling any underperforming investments. Any losses you incur from the sale may be able to offset your overall gains.

Retirement Accounts

If you have a 401k or IRA and you have not reached your contribution limit for the year, you want to consider making a catch-up contribution to do so.

If you inherited an IRA from someone other than your spouse or you are over age 70 1/2, be sure you have already taken your required minimum distribution amounts from your 401k or IRA. If you don’t take this distribution by the end of the year, the IRS will charge you a penalty for 50 percent of the distribution amount. Read the rest of this entry »

Personal finance reports are also known as financial statements or financial accounts. A personal financial report provides a detailed accounting of an individual’s financial health for a specific period of time: annual, quarterly or monthly.

Banks and lending institutions often require a personal finance report to be included in a loan application. Individuals can also use the reports as a way to keep track of their personal and business-related finances when creating a budget.

Function

Personal financial reports state an individual’s net worth by detailing all income, assets and liabilities. They are often used when applying for loans from banks and lending institutions as a means to show solvency and credit worthiness.

The reports provide a detailed financial overview containing all of the details that institutions need to know when making a credit inquiry. These items include: cash on hand, income, liability payment schedules, household expenses, and assets.

Types

There are three main types of personal financial reports: credit, small business and personal budgets.

Lending and financial institutions usually require personal financial reports to be included in a credit package from individuals seeking personal loans, car loans or business start-up loans. The company uses the report to determine the financial solvency of the individual. Besides an individual’s assets and liabilities, these reports also include any information regarding past bankruptcies and lawsuits.

Business personal finance reports are often required from individuals seeking small business loans from federal and state government agencies. The reports are included in the loan presentation package and are used to determine the financial status of the loan seeker.

Many people use financial reports to create a personal budget. The reports clearly show an individual’s financial situation, indicate any potential cash flow problems and allow users to track financial changes. Many personal money management software programs include financial report templates.

Features

There are four basic sections in a report: income statement, cash flow statement, asset statement, and a balance sheet.

The income statement should state the actual amount of money that an individual has on hand and include all forms of income that an individual received during the time period covered by the report. Besides salary, other forms of income to be included are any proceeds from stocks, annuities or income from rental properties. It is important to remember to include the net amount of these income sources and not the gross amount.

The cash flow statement is used to show a person’s expenses for the report time period. All outgoing cash needs to be included in this section of the report. Rent or mortgage payments, car payments, insurance, utilities, credit card bills, money owed to individuals, and any other liabilities are entered into this section. When preparing the report for a bank or lending institution, you will also need to include creditor names, addresses, types of loans, and detailed payment schedules. Read the rest of this entry »

Budget your Personal Finances

Step 1) The first step in budgeting your personal finances is making a month-by-month breakdown of how much INCOME you make in a month and what your monthly EXPENSES are. Include everything in your monthly breakdown that comes in and goes out. Do this for all 12 months of the year.

Step 2) The second step in budgeting your personal finances is STICKING TO YOUR BUDGET. Have you budgeted $300 for spending money this month (i.e. going out to eat, to restaurants, to the park, etc)? Then make sure you stick to that budget and don’t go over it! Be responsible.

Step 3) The third step in budgeting your personal finances is LIVING UNDER YOUR MEANS. If your total gross income for a month is around $7,000, don’t spend $8,000. Live under your means and save 1 years worth of liquid cash in a savings account for a rainy day.

Step 4) This is a good beginner’s article on how to budget your personal finances. Good luck!