A P&L statement of your personal finances

 

In today’s global world, we often come across news of tech moguls, industry giants, investment gurus and various other business personalities around the world making news headlines for their “Net Worth”. Presumably an indication of their wealth and a token of their success, we often employ this ‘net worth’ statistic to compare billionaires to each other in an attempt to rate and record their success. But what exactly does the net worth value signify? While we see staggering net worth statistics flowing in every news cycle, with earnings constantly reaching new highs, one’s net worth is simply the sum of their liabilities subtracted from their assets.

While it may not be as mind boggling as that of some tech moguls and industry billionaires quite just yet, you also have a net worth of your own. Wondering how to calculate it? For that, today’s topic might come in handy; A Profit and Loss (P&L) statement of your personal finances; what they are, how you can keep track of them, and what the benefits you could gain from doing so are.

Understanding Profit and Loss Statement

From a company’s perspective, the P and L is self-explanatory; it tallies their gains against their losses, based on various business statistics and company performance numbers over a certain duration. For your personal finances however, a P&L statement is a tally of all that you earn, and all that you lose or more accurately, spend. Let’s take a look at how this might work.

The Profits

As a young investor, your ‘profit’ is any amount of funds that is coming into your personal finance accounts. This includes a number of things. Firstly, if you earn a salary, this salary can be logged here. Any income you earn from freelance jobs count as well. Additionally, any further income from various investments that you might have including dividend payments on stocks, debt interest payments if you own any debt instruments, as well as rent that you may receive if you own property that you have rented out; All these factor into the profit section of your P&L statements. If you purchase an HDFC Life Pension Guaranteed plan, then the routine payouts you get from the plan can count under the ‘profits’ or income section of your P&L statement.

The Losses’

The ‘losses’ section is more accurately defined as expenditure. Here, any money that you expend is logged. From your monthly grocery, Wi-Fi, electricity and gas bills, subscription services you may have availed of, as well as any house rent or SIP payments you are making, all count under the ‘expenditure’ section of your P&L statement. If you were to invest in the insurance plan for instance, then the premium payments made towards the plan will come under this section.

The Tally

Now that you have identified all aspects of your personal finance and personal P&L, you can now move on putting them down in a format that helps you keep track and tally your personal P&L. Here’s an example.

Income	Amount (Rupees)
Salary	50,000
Dividend Payments	5,000
Salary B	25,000
Rent earned	20,000
Total	100,000
Expenditure
Rent	20,000
Electricity	2,000
Wifi	1,000
Groceries	4,000
Phone bill	800
Subscription services	500
Car loan	12,000
Total	40,300
Net worth (Income - Expenditure)	59,700

Conclusion

Keeping tabs on your personal finance can be an important step towards achieving financial independence, and making your money work for you. This tally helps keep track of exactly how much is coming in, how much is going out, and what savings you are left with. You can easily create a personal P&L statement using the numerous charting software’s that is now available. If you are looking to take another lunge towards financial independence, HDFC Life Pension Guaranteed Plan will help you guarantee* a pension payment, based on a onetime premium. Visit the website to know more.

*The word “Guaranteed” and “Guarantee” mean that annuity payout is fixed at the inception of the policy

ARN: ED/10/21/25884