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Personal Financial Statement FAQ Canada
A personal financial statement is a document that outlines an individual's financial situation. Assessing someone's financial situation is done by compiling a list of the individual's assets (e.g. cash, bank accounts, real estate, cars and investments) and a list of the individual's liabilities (e.g. credit card debt, mortgages and other loans). Subtracting the individual's total liabilities from their total assets will provide that individual's net worth.
There are many reasons why you may want a personal financial statement. You may require a personal financial statement in any of the following circumstances:
Net worth is the difference between everything of value that a person owns and all the debts that that person owes. In short, a person's net worth is the value of all assets minus the value of all liabilities. If the person has more assets than liabilities, then that person has a positive net-worth. If the person has more liabilities than assets, then that person has a negative net worth.
Assets refer to anything that is owned by an individual or corporation that has a monetary value. Assets may include any of the following:
Liabilities refer to financial obligations, debts or claims owed by an individual or corporation to another party. Liabilities may include any of the following:
Contingent liabilities are potential debts that you will be responsible for if certain events occur in the future. Contingent liabilities may arise from any of the following:
A secured debt is a debt backed by collateral. Lenders ask for debts to be secured in order to minimize the risks related to lending. For instance, a mortgage is considered a secured debt because the lender can seize the property to pay off the debt if the borrower defaults.
An endorser or guarantor is a person who agrees to pay any losses directly to the lender should the debtor default. If you are an endorser or guarantor, you are in effect, assuming the financial responsibilities of another person(s) debt if they default on their loan payments.