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Building a One Page Financial Statement to Change Your Financial Future

by Ben Leybovich on January 21, 2014 · 28 comments

  

Would you be terribly surprised if I told you that once in a while I run dry on ideas for the BiggerPockets blog?  I mean, between BP and my blog I write quite a lot, and while it’s easy when inspiration takes over, there are times when it’s simply not there…what to do?

Good news – there are two ways I can usually come up with topics to write about.  The first thing I do to get ideas is check what Brandon Turner wrote about in the past two weeks; I am usually able to find something to disagree with.  This is my favorite approach indeed – it’s very difficult to say why…

However, once in a great while Brandon manages to go for two weeks without making some fantastically silly argument in his articles that I can pick at, in which case I am back to being stuck and it’s time for plan B which is to check the forums – what do people want to know this week?  Perhaps this should be my plan A, but I just can’t help myself…

This article is in response to something I saw in the forums:

This Week in the Forums

I came across a thread this week in which the gentleman was asking for a template of a Financial Statement.  I have a story around this that I thought I’d share:

The Story

I am a violinist by training.  A lot of what I did to make a living in the past was teaching – at one point I had many budding fiddle students.  Well – it just so happens that the grand-father of one of my students was a very successful RE investor.  I knew that there was a ton that I could learn from him if I could only gain access to him, which was anything but easy.  For the first few years he didn’t give me the time of day.

Eventually, though, either because it was obvious that I was trying very hard, or for another, he invited me over for a chat and while most of what was said is none of your business, I will tell you that he asked me for a Financial Statement.  He said nonchalantly, as if it didn’t matter at all – just give me something simple; something on one page that lists your assets and debts, and your income…Come back tomorrow and bring it – 11 AM will do fine.

Financial Statement

I did not have a one-page Financial Statement.  I had my tax returns, which is the most complete financial statement there is, but he obviously was not looking for that…what to do?

Well, just like most people reading this, at one point I had read Rich Dad Poor Dad by Robert Kiyosaki and I followed that up by spending $200 on the board game Cash Flow.

If you haven’t played this game, you should.  Though it’s only the very tip of the iceberg and to succeed in real life you’ll need to know much more, this game is a very effective tool to get you thinking in the right direction…

One of the playing pieces in this game is essentially a one-page financial statement.  Players pull profession cards at the outset of the game which assign the player’s starting financials.  These financials get transferred onto the one-page financial statement, and every time a player is involved in a financial event throughout the game, good or bad, the financial statement is amended by the player to reflect the changes brought on by the event.  What makes the Cash Flow game is so good is that it allows players the benefit of experiencing in real-time the impact of the financial decisions they make.

A financial statement is comprised of two main parts: Income Statement and Balance Sheet.  The Income Statement lists, tallies, and reconciles all of the income streams as well as expenses.  The resulting figure is Cash Flow.  The Balance Sheet tracks all of the Assets and Liabilities.

Coming Back to my Mentor’s Request

Put before the reality of needing a one-page financial statement before 11 AM the following day, there was but one thing to do – make one, and so I did.  I went home, opened a new Excel file, and created a one-page report loosely modeled on the financial statement from the Cash Flow game.  I was able to program all of the cells as need-be and within 45 minutes I had the complete summary of my financial life ready to go.

I still have it, though it has undergone modifications to accommodate the increased complexity of the things I am involved with now-days.  Patrisha and I updated this financial statement every month for a period of 2 years, until we gained a clear perspective on how our financial life really works.  Currently, we update it each quarter and any time we are considering making a financial decision – we like to know the impact of this decision before we are in the middle of it.

The Impact

Most people come into the CPA’s office with a box full of receipts.  Most people come into the banker’s office with a proposal written on the back of one of those receipts.  This may be news to you, but if it smells like crap, and looks like crap, then it probably is crap.  By being prepared we separate ourselves from the pack – dwell on this!

Before deciding to give me the time of day, the old man was testing me: do I know what is a financial statement; do I know how to build one; do I have a certain level of sophistication it takes to succeed with money?

Coming back at 11 AM the next day with a one-page financial statement in hand, just as he had requested, did the job.  First he looked at the paper I handed him.  Then he looked up at me.  Then he took another look at the financial statement and without lifting his eyes from the page pointed to a chair at the table – this was many hours of learning and many joint ventures ago…

Conclusion

As I stated in the beginning, your tax return is the most complete variant of your financial statement.  Additionally, your CPA can create a document called Statement of Financial Condition, which is a certified version of your balance sheet (it typically does not address income).  You should expect to have both of those handy any time you ask for money.

But, I do think that for practicality’s sake of you knowing where you stand in real time, as well as the sake of being able to provide anyone with a “short-hand” bird’s-eye view of your financial condition, you should indeed keep a one-page summary version of your Financial Statement.  Furthermore, in order to gain most out of it, I recommend that in lieu of buying a computer software, or asking me to e-mail you mine, you simply build one in excel or another program similar to that.  And if you have no clue where to begin, spending a few bucks on the Cash Flow game is not the worst idea in the world – it’ll do much good for you…

P.S. If you are close to Lima, OH, call me up – we’ll set up a time for you to come out and play the game.  I still have it somewhere in the closet, though I haven’t played the board game in a few years, so I may be a little rusty.  But, I have been doing OK playing the real life version – hopefully that’ll get me by…
Photo Credit: Philippe Put

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{ 28 comments… read them below or add one }

Curt January 21, 2014 at 11:53 am

Thanks Ben. We are working on our Business Plan, a variant and super set of the financial statement. This is another topic to expound upon. FWIW I could use a few examples to look at. J Scott put his business plan up on 123flip.com some where.

Can folks offer examples of business plans and financial statements to get the gist of the format and content? Thanks!

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Ben Leybovich January 21, 2014 at 12:12 pm

Hey Curt,

J Scott is an absolute genius as far as I am concerned. There are lots of people that I like, but only a few who cause me to stop and think. J is one – if you can copy him, I would :)

My own business plan goes something like this:

1. Be woken up every morning at 6 AM by a hungry twins – 5 years.
2. Have presence of mind to feed twins and make COFFEE – 5 years.
3. Clothe, feed, bathe, and otherwise facilitate life for twins – 20 years.
4. Try to address at least some of my wife’s needs…
5. Put a syndicate together when twins are asleep…
6. Try not to lose your mind

This is as precise as it gets lol

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Shaun January 30, 2014 at 10:38 pm

7. Keep BRomance with Brandon fresh and exciting.
:)

(Great article Ben!)

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Zach February 27, 2014 at 8:51 am

A net worth statement is a form of financial statement and is very easy to make. Just list all your assets and all your liabilities, subtract the second from the first, and you have your net worth.

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Ryan Ebanks January 21, 2014 at 11:55 am

Ben, I often wonder if we were to poll most RE Investors, what percentage of us would say yes to reading Rich Dad Poor Dad… Healthy rivarly with Brandon (et al) is good entertainment (better than pay per view) and provides valuable insight on different approaches.

Anyhow, after years of leveraging I had become less palatable for lenders. Then, I discovered the Personal Financial Statement and was able to appropriately package myself, my plan, my vision to successfully negotiate unconventional financing. Seems to be more value in the process of preparing the PFS and what it teaches about ones financial health.

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Ben Leybovich January 21, 2014 at 12:17 pm

“…was able to appropriately package thyself…” YES, YES, YES!

Thanks for your comment Ryan. I hope people read it carefully!

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Greg Miller January 21, 2014 at 12:01 pm

Great point Ben! My wife and I update ours monthly or bi-monthly. We used the same financial statement from the Cashflow game. Received a working spreadsheet while receiving real estate investing education via Rich Dad coaching. Anyway, every potential funding source we have worked with over the last two years has asked us for our financial statement. It is key!
Great job on this article Ben!

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Ben Leybovich January 21, 2014 at 12:22 pm

Indeed – the financiers want to see the financial statement. Right on Greg!

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Steve January 21, 2014 at 4:40 pm

Ben, Great post. I’ve now read enough of your posts that i’m able to pick out your writing style in the first paragraph.

This gives me a great feeling knowing you started with a statement based off of the one from Cash Flow 101 as I did the exact same thing. I went asking for money and I’ve based my personal one page financial statement off of the same one from Rich Dad Poor Dad. It doesn’t look impressive but i’m updating it quite often in order to track my networth over time and my pay down of debts.

If I’m ever out in Lima I sure would love to hit you up for the game. I do enjoy playing it, unfortunately it ‘educational’ and automatically people turn away from it.

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Ben Leybovich January 21, 2014 at 9:39 pm

Thanks so much Steve for following my stuff. You know, there’s a way to write that appeals to SEO, and a way to write that makes writing fun – I can’t help myself :)

I’ll take you up on a game of Cash Flow any time Steve!

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Curt January 21, 2014 at 8:22 pm

Can someone post a link to an example of the rich dad or better financial plan? Tnx

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Ben Leybovich January 21, 2014 at 9:37 pm
Dan Nolen January 21, 2014 at 10:33 pm

We bought the Cash Flow game for Christmas directly from Rich Dad’s website and paid only $85.00. My 11 year old beat us all on the first try!

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Ben Leybovich January 22, 2014 at 5:27 am

Haha Right on Dan!

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Dominika M January 22, 2014 at 6:26 am

Hi, this is a free Rich Dad financial statement in excel. I use it and brought it to my mortgage broker the last time. It still said “doodads” and “Rich dad net worth” (which excludes the worth of your doodads).
http://www.google.ca/url?sa=t&rct=j&q=&esrc=s&frm=1&source=web&cd=2&ved=0CD8QFjAB&url=http%3A%2F%2Fwww.richdad.com%2FRichDadFiles%2FRichDad%2Fc8%2Fc82603eb-c0ae-49a8-a0c9-2e9b4f79f45c.xls&ei=AcPfUq31OsPksASMmIKwDw&usg=AFQjCNGlcdFW-uEFX_1IEKchA1q6HZqUlA&sig2=UAig2ObMDejkgGZ_18clZw&bvm=bv.59568121,d.aWM

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Curt January 22, 2014 at 7:24 am

Thanks alot Domiinica for taking the time to upload that nifty spread sheet.

Thanks Ben for the ebay link, bought it.

Next up is looking for Business Plan examples for a buy and hold REI, then the Executive Summary.

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Ben Leybovich January 22, 2014 at 12:38 pm

Call me Curt

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Lear Riojas March 18, 2014 at 1:09 am

Thanks, this looks a lot better than the one I’ve been using for years. Also if you use Mint.com and input all of your data if you look at it on a tablet it does a great job of showing you where you are financially in terms of Networth. I would only add the homes that you collect rent from as an asset so that its more accurate.

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Jessica Swingle January 23, 2014 at 10:56 am

I update our personal financial statement every month. I’ve been doing this since college and it’s interesting to go back and see how things have changed over the years.

More importantly, it keeps me focused on what our financial status is at any given point in time. Honestly, I’m not sure how people confidently make informed decisions about ANY major change in life (moving, investing, baby) without a true understanding of their current position.

Even when our net worth was way, WAY negative, knowing the numbers brought a sense of comfort. The only way to work toward progress is understanding what you’re up against. When problems are abstract, for me anyway, they always seem more overwhelming.

Isn’t it Dr. Phil who says “You can’t change what you don’t acknowledge”?

In any case, I’ve tried several different systems (Mint, Quicken, etc) through the years. After 8 years of trying to find the perfect tracking software, I finally went back to the tried & true excel spreadsheet. If Rockefeller can manage millions with ink & paper, a one page Excel will work just fine, thank you. (Of course, for business I use Quickbooks, which I highly recommend).

It keeps the data clean and simple. Yes, I have to look up my personal accounts one by one each month to track balances – however, I find the short time it takes to do this is worth it. It keeps me in touch with every aspect of our finances. The simple one-pager, literally, empowers me to make the best decisions possible for my family, business, & investments.

Jessica

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Ben Leybovich January 23, 2014 at 12:27 pm

Hey Jessica,

I totally agree about knowing where you stand. We use QuickBooks and reconcile inside Excel.

Thanks so much for your thoughts!

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John Homich January 23, 2014 at 6:51 pm

Great article. I just purchased my first investment property in November and was just think about how to prepare a financial statement. You have given me a very simple roadmap. Thanks!

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Ben Leybovich January 23, 2014 at 9:17 pm

Congrats on your first bird John!

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djopgenort January 24, 2014 at 12:53 am

I do a “snapshot” several times a year – I total up all of the accounts, add any pending large invoices, net rent if it in a week or so, minus credit card debt and any large upcoming expenses that I know about (scheduled car repairs, dentist, etc). This amount is the “cash avail”.
Items that have restrictions (an IRA or HSA, for example) get an astrisk and only the amount that would be left “after tax & penalty” gets added — that is my “total in case of emergencies” net worth.
Note that I try to remember to remove tenant deposit money from the calculations — it’s not mine.

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Ben Leybovich January 24, 2014 at 5:36 am

Well – if you rent out stuff like Brandon Turner’s Waldo, you can count on the deposits sticking to you lololol…

I have a lot more money in the accounts than what is mine – floats. Property taxes, insurance premiums, vacancy and maintenance – it all adds up to a lot with a large portfolio, and while I can shuffle it around if need be it’s really not mine; it has been allocated. Isn’t it interesting how you can take a snapshot which looks good, but if you dig under the surface – not so much…

Thanks so much for your comment dj!

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Matt Ovis January 27, 2014 at 10:31 pm

A one page financial statement is a huge impact for your future finances and investments. Take note of every detail, and never miss a single expense made. Thanks for sharing Ben! I really appreciate it.

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Ben Leybovich January 28, 2014 at 8:17 am

Thank you Matt!

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Carolyn Lorence January 30, 2014 at 9:35 pm

Great post, Ben! Love your blog, and your long-running rivalry with Brandon is very entertaining!

For our personal financial management, we use Quicken Premier 2013, which uses the one-step update to download all of our spending, savings, retirement accounts, etc. into one personal financial statement. Saves a ton of time.

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Ben Leybovich January 30, 2014 at 10:46 pm

Thanks Carolyn,

What you need to know is that I really like Brandon – period! I am not sure I love the facial hair thing he’s got going on, but the rest him I am down with. I can’t know for sure, but I think that the feeling is mutual…So, we keep going at it :)

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