Kingdom- Focused Finances: Understanding the Role of a Financial Statement
A financial statement, or a statement of financial position, offers a snapshot of where you currently stand financially. It reflects the contents of your checking and savings accounts, and even the cash in your wallet. It also accounts for the value of everything you own—your home, car, furniture, and other belongings. These are known as your assets. However, it doesn’t stop there.
Your financial statement also takes into account your liabilities—your mortgage, car loans, credit card debt, unpaid bills, and so on. By subtracting your total liabilities from your assets, you arrive at a number that represents your net worth. Essentially, if all your possessions were sold and all your debts paid, this is the amount you would have left. A financial statement simply answers the question, “Where am I now?”
While there are many reasons to create a financial statement, it’s essential to approach this process with caution, mindful of both its benefits and potential pitfalls.
A Word of Caution
Jesus said in Luke 12:15 (NLT), “Beware! Guard against every kind of greed. Life is not measured by how much you own.” A financial statement, by its nature, tallies the things you possess. If you find joy in counting up your assets, be warned—God did not design life to be fulfilling based on material abundance. Our true fulfillment comes from Jesus Christ alone. If you catch yourself continually revisiting your list of assets, or measuring your worth or others’ by these physical possessions, it’s time to reevaluate. Remember, the poorest soul on earth holds more value in God’s eyes than all the wealth this world can offer.
Before delving into the practical use of financial statements, we must be aware that they calculate the value of things that hold no eternal significance. Overemphasizing them can easily lead us into a trap.
The Proper Use of a Financial Statement
While there are dangers in misusing a financial statement, it can also be a valuable tool when used correctly. Here are several reasons why taking the time to create and update a financial statement can be beneficial:
Reality Check: Sometimes, we think we are in a better financial position than we actually are. Proverbs 27:23 (NLT) reminds us, “Know the state of your flocks, and put your heart into caring for your herds.” This verse speaks to the importance of knowing where we stand. By filling out a financial statement, you might be surprised to discover that debt has quietly accumulated through purchases with no lasting value.
Informed Decision-Making: A financial statement can influence how you make future financial decisions. Many purchases depreciate quickly, like furniture or electronics. For example, buying a new sofa might seem like a good deal initially, but its value plummets the moment it’s delivered. Keeping track of such transactions helps you become a wiser, more intentional spender.
Educational Growth: Regularly updating your financial statement can be an eye-opening educational experience. It teaches the importance of thoughtful spending, highlights which purchases hinder your financial goals, and ultimately makes you a more prudent consumer. If you’ve been having financial challenges, watch this video on my YouTube channel here.
Tracking Progress: A financial statement can serve as a tool for tracking your progress. Jesus emphasized the importance of planning and accountability in Luke 14:28-30 (NLT): “But don’t begin until you count the cost. For who would begin construction of a building without first calculating the cost to see if there is enough money to finish it?” By keeping an updated financial statement, you can monitor whether you’re successfully reducing debt and moving closer to your financial goals.
Future Planning: A financial statement also aids in long-term planning. For instance, if your goal is to purchase a home, your financial statement can help you determine if it’s the right time to take on a mortgage. If your net worth has been declining, it might be wise to address that issue before incurring more debt.
Conclusion
A financial statement is a foundational tool, but it’s just the beginning of your financial journey. It doesn’t provide all the answers, such as where your money has been going or how much you’ve been earning. However, it’s a crucial first step in managing your finances wisely.
As Proverbs 27:23 advises, it’s important to be diligent and aware of our current situation because “riches are not forever.” Life is full of changes, and we must periodically assess where we stand, financially and spiritually. By understanding and applying these principles, we can use our finances in a way that honors God and aligns with His kingdom’s values.
Reflection Questions:
- How can creating and updating a financial statement help you make more informed financial decisions?
- Have you ever made a purchase that ended up costing more than you initially anticipated? What did you learn from that experience?
- If you’re struggling with consumer debt, how might regularly updating your financial statement help you regain financial stability?
“There is desirable treasure, And oil in the dwelling of the wise, But a foolish man squanders it.” (Proverbs 21:20)
**Erica weaves themes of transformative hope and grace-filled leadership into everything she shares on her blog. She’s an author, a speaker, and a life coach, who offers honest encouragement and road-tested wisdom about topics ranging from leadership and lifestyle, to discovering your God-crafted identity, design, and purpose.
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