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Jun 2, 2021

How Preparing Your Own Financials Will Make You A Better Investor

by Phillip MacKellar

Phillip MacKellarDo you want to be a better investor and accurately read corporate financial statements? Or do you want to master your personal finances and discover how your investments fit into your overall financial plan? If so, you are not alone. Many people want to know how their portfolio is performing, or feel a need to get on top of their finances. While there are many ways to reach these goals, building your own financial statements is an effective method. Personally, it has made me a better investor while also giving me a clear overview of how my family’s finances are faring. I hope it can do the same for you. In this article, I’ll walk you through my process, how it has made me a better investor, and how it grew my knowledge.

My process is easy – twice a year I prepare an income statement and a balance sheet for my family. In many ways, this is reminiscent of what a CFO will do each quarter before presenting results to investors. First, I build an income statement in good old Excel. To do this, I enter the salaries my partner and I have generated, record all the expenses and taxes we have accrued, and use these figures to calculate our net income (or savings rate).

I then build a balance sheet by totaling all our assets (e.g., real estate, funds held in our bank and investment accounts, etc.). After adding up the assets, I subtract all liabilities (e.g., debts we owe). The difference between our assets and our liabilities is our equity, which represents our net worth. The process is straightforward; to make it even easier, you can find simplified copies of the Excel templates I use here.

Creating my own financial statements made me a much better investor, especially when I was just starting out. Way back in university, I was interested in stocks and “invested” regularly. By “investing” I mean that I threw money at companies in the news, or penny stocks being peddled online (sounds like r/wallstreetbets). Like many people, I didn’t read financial statements, focus on valuations, or care about portfolio management. As a result, my portfolio was full of positions I didn’t know much about, and my returns sucked.

This changed after I had a few business classes under my belt, read books on investing in my own time, and dug deep into personal financial planning as well. After the pounding in 2008-09, I decided to take things seriously. It was like a lightbulb clicked in my head. To conquer my personal finances, I started producing my own balance sheet and income statement on a monthly basis (overkill, I know). Meanwhile, when it came to investing, I stopped looking at stock charts almost entirely, spent hours on Google Finance looking through financial statements, and got to know the OSC and SEC websites very well.

It was as though I had set off a self-reinforcing loop. The more corporate financial statements I read, the more detailed my own financial statements became. Furthermore, the more I thought about parts of my own personal financial statements, the more I noticed and questioned parts of the corporate balance sheets I was reviewing.

Over time, I started to incorporate common business practices into my personal statements too. I would include off-balance-sheet items (e.g., unused RRSP contribution room), set personal financial goals (e.g., savings targets), and generate forecasts. I even convinced some friends and family members to make regular financial statements. Having family members involved in their own learning process provided me with outside sounding boards when needed. This had the positive side effect of even further improving my own financial statement construction and sharpening my investing game.

To make a long story short, by building my own financials, I learned about investing by doing. I loved every minute of the self-reinforcing loop I found myself in, and was learning quickly as I put principles into practice.

Shortly after starting my self-guided investing journey in earnest, I graduated from university. The year was 2010. For those who need a reminder, the economy in 2010 was recovering from a little something called the Financial Crisis. This meant jobs were hard to find. I remember a good friend (now an employed lawyer) lamenting that he was turned down by every employer he approached… including McDonalds. Fortunately, I was a little luckier – I was hired by Freedom 55 Financial and became a personal financial planner. Though I didn’t enjoy the job and left in less than a year, it further demonstrated the value of building my own financials.

Working as a financial planner also improved my financial literacy and helped me to further contextualize investing, saving, and employment income within an overall financial plan – which then helped me fine-tune my statements even more. The role also drove home for me the pros and cons associated with different tax-advantaged structures available to Canadian citizens (e.g., the RRSP, RESP, TFSA, etc.). Moreover, it taught me about the weird and wonderful world of insurance. As I learned, all new insights flowed into my financial statements. I began to view the various line items on my balance sheet as tools to help me reach long-term goals (e.g., retirement).

In other words, spending my days immersed in financial planning drove home the importance of building my own financials and helped me further master my money. I’ve learned a lot about investing and finance since then too, especially after joining Contra the Heard Investment Newsletter. Nevertheless, these experiences established a strong and lasting foundation that I’ve continued to build on since then.

So, there you have it – if you’re looking for a simple and effective way to become a better investor and conquer your personal finances, consider creating and maintaining your own personal financial statements, and see where the process takes you. If you’re interested in templates or more detailed guidance on how to build your own balance sheet and income statement, you can find this information and more at

I hope this helps you on the journey of mastering your money and improving your investment performance. Good luck!


Philip MacKellar is an analyst and portfolio manager at Contra the Heard Investment Newsletter. He has been with the company since 2011 and has been investing since 2004. The newsletter’s primary focus is on contrarian and value-oriented investment opportunities traded in the United States and Canada. Philip also writes for Seeking Alpha, the Globe & Mail, and blogs about personal finance topics at You can follow Philip on Twitter @Rallekcam.