Would you be terribly surprised if I told you that once in a while I run dry on ideas for the BiggerPockets blog?\u00a0 I mean, between BP and my blog I write quite a lot, and while it\u2019s easy when inspiration takes over, there are times when it\u2019s simply not there\u2026what to do?<\/p>\n
Good news \u2013 there are two ways I can usually come up with topics\u00a0to write about.\u00a0 The first thing I do to get ideas is check what Brandon Turner<\/a> wrote about in the past two weeks; I am usually able to find something to disagree with.\u00a0 This is my favorite approach indeed \u2013 it\u2019s very difficult to say why\u2026<\/p>\n 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\u2019s time for plan B which is to check the forums \u2013 what do people want to know this week?\u00a0 Perhaps this should be my plan A, but I just can\u2019t help myself\u2026<\/p>\n This article is in response to something I saw in the forums:<\/p>\n I came across a thread this week in which the gentleman was asking for a template of a Financial Statement<\/i>.\u00a0 I have a story around this that I thought I\u2019d share:<\/p>\n I am a violinist by training.\u00a0 A lot of what I did to make a living in the past was teaching \u2013 at one point I had many budding fiddle students.\u00a0 Well \u2013 it just so happens that the grand-father of one of my students was a very successful RE investor.\u00a0 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.\u00a0 For the first few years he didn\u2019t give me the time of day.<\/p>\n 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.\u00a0 He said nonchalantly, as if it didn\u2019t matter at all – just give me something simple; something on one page that lists your assets and debts, and your income\u2026Come back tomorrow and bring it \u2013 11 AM will do fine.<\/i><\/p>\n I did not have a one-page Financial Statement.\u00a0 I had my tax returns, which is the most complete financial statement there is, but he obviously was not looking for that\u2026what to do?<\/p>\n Well, just like most people reading this, at one point I had read Rich Dad Poor Dad by Robert Kiyosaki<\/a> and I followed that up by spending $200 on the board game Cash Flow<\/a>.<\/p>\n If you haven\u2019t played this game, you should.\u00a0 Though it\u2019s only the very tip of the iceberg and to succeed in real life you\u2019ll need to know much more, this game is a very effective tool to get you thinking in the right direction\u2026<\/p>\n One of the playing pieces in this game is essentially a one-page financial statement.\u00a0 Players pull profession cards at the outset of the game which assign the player\u2019s starting financials.\u00a0 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.\u00a0 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.<\/p>\n A financial statement is comprised of two main parts: Income Statement and Balance Sheet.\u00a0 The Income Statement lists, tallies, and reconciles all of the income streams as well as expenses.\u00a0 The resulting figure is Cash Flow.\u00a0 The Balance Sheet tracks all of the Assets and Liabilities.<\/p>\n Put before the reality of needing a one-page financial statement before 11 AM the following day, there was but one thing to do \u2013 make one, and so I did.\u00a0 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.\u00a0 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.<\/p>\n I still have it, though it has undergone modifications to accommodate the increased complexity of the things I am involved with now-days.\u00a0 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.\u00a0 Currently, we update it each quarter and any time we are considering making a financial decision \u2013 we like to know the impact of this decision before we are in the middle of it.<\/p>\n Most people come into the CPA\u2019s office with a box full of receipts.\u00a0 Most people come into the banker\u2019s office with a proposal written on the back of one of those receipts.\u00a0 This may be news to you, but if it smells like crap, and looks like crap, then it probably is crap.\u00a0 By being prepared we separate ourselves from the pack \u2013 dwell on this!<\/p>\n 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?<\/em><\/p>\n Coming back at 11 AM the next day with a one-page financial statement in hand, just as he had requested, did the job.\u00a0 First he looked at the paper I handed him.\u00a0 Then he looked up at me.\u00a0 Then he took another look at the financial statement and without lifting his eyes from the page pointed to a chair at the table \u2013 this was many hours of learning and many joint ventures ago\u2026<\/p>\n As I stated in the beginning, your tax return<\/a> is the most complete variant of your financial statement.\u00a0 Additionally, your CPA can create a document called Statement of Financial Condition, <\/i>which is a certified version of your balance sheet (it typically does not address income).\u00a0 You should expect to have both of those handy any time you ask for money.<\/p>\n But, I do think that for practicality\u2019s sake of you knowing where you stand in real time, as well as the sake of being able to provide anyone with a \u201cshort-hand\u201d bird\u2019s-eye view of your financial condition, you should indeed keep a one-page summary version of your Financial Statement.\u00a0 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.\u00a0 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 \u2013 it\u2019ll do much good for you\u2026<\/p>\n P.S. If you are close to Lima, OH, call me up \u2013 we\u2019ll set up a time for you to come out and play the game.\u00a0 I still have it somewhere in the closet, though I haven\u2019t played the board game in a few years, so I may be a little rusty.\u00a0 But, I have been doing OK playing the real life version \u2013 hopefully that\u2019ll get me by\u2026 Would you be terribly surprised if I told you that once in a while I run dry on ideas for the BiggerPockets blog?\u00a0 I mean, between BP and my blog […]<\/p>\n","protected":false},"author":810,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[5524],"tags":[],"class_list":["post-53218","post","type-post","status-publish","format-standard","hentry","category-real-estate-investing-for-beginners"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/53218","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/810"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=53218"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/53218\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=53218"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=53218"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=53218"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}This Week in the Forums<\/b><\/h3>\n
The Story<\/h2>\n
Financial Statement<\/b><\/h2>\n
Coming Back to my Mentor’s Request<\/b><\/h2>\n
The Impact<\/b><\/h2>\n
Conclusion<\/b><\/h3>\n
\nPhoto Credit: Philippe Put<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"