Personal Profit and Loss Statement Template
If you want to manage your finances properly, you need to assess your financial health regularly. For businesses, the standard measurement of financial health is the profit and loss statement (P&L). In essence, the P&L calculates how much the business made minus the expenses.
The business profit and loss statement allows you to see if you have made a net profit (or loss) within a given period (i.e., a fiscal year). While it might seem odd to manage your personal finances like a business and treat your income and expenses in terms of profit and losses, it is crucial to managing your finances accordingly.
Fortunately, a personal profit and loss statement template can help make the process very easy.
Personal Profit and Loss Statement
A personal profit and loss statement is identical to a business profit and loss statement. However, there is one distinct difference. With a personal profit and loss statement, you will be accounting for your household or personal monthly income and expenses.
Come to think of it; your personal finances is run similar to a business—you have income that comes in and expenses to pay for, not to mention an ongoing list of other things to manage. Many businesses create a profit and loss statement to create a budget and get a clear picture of where the business is going financially.
Personal Profit and Loss Statement Entries
When using a personal P&L statement template, you will likely encounter a few terms you might not be familiar with. For instance:
Your income can come from various sources. Many people list down their salaries as their income. However, there are also other types of income you should include. For instance, other things like interests or dividends, alimony, unemployment or child support should also be considered income.
Essentially, any money that you get should be accounted for even if it’s not taxable. When making income entries, you should also use the net amount. The net amount is the income after all the deductions and taxes have been subtracted. It is the income you have that can be used for expenses.
There are two types of expenses: fixed and variable. The latter can change monthly such as groceries, utility bills, phone bills, etc. You need to indicate the actual amount of your variable expenses monthly. The exact figures can be used later on to create your budget.
As the name implies, fixed expenses stay the same each month. Typical examples are your rent, mortgage, insurance, and car payments. Even if you don’t receive your bills for those payables, you already know how much to set aside.
Designing Your Budget Using Your Personal P&L Statement Template
Figure out what your priorities are in terms of your finances. What do you want to accomplish? Identify your top three financial priorities and use them to create your budget. The following key components should also be included in your personal P&L statement:
- Your actual net income
- Your expenditures
- Unexpected expenses
With a personal P&L statement, you can clearly see the money you have for a specific period and the expenses. Depending on what you see on your personal P&L statement, you can strategize if you need to decrease your costs or increase your income.
Let’s say your income is not enough for all of your expenses. Understandably, you need to eliminate a few things. Start with the top three priorities you have identified. They should be included in your budget.
Continue adding items based on priority. From there, you can figure out if you need to shave a few dollars off some of the items (i.e., your phone bill) so you can fit things in your budget. Be creative if you have to so you can include as many as you realistically can in your budget.
Staying on top of your personal finances is no easy feat. However, with a personal profit and loss template, it has never been easier!DOWNLOAD