Creating a Personal Balance Sheet

Financial Literacy Month: Part 3

We are over halfway through Financial Literacy Month and so far, we have covered Getting Organized and Creating a Budget. This week I felt it would be good to focus on creating a personal balance sheet.

What Is a Personal Balance Sheet?

This document can go by many names:  personal financial statement, net worth statement, statement of assets and liabilities and many more. While each of these tools may vary slightly in appearance, their core purpose is helping you gauge your financial health by detailing your assets and liabilities. Using the personal balance sheet, you can calculate your net worth (assets – liabilities = net worth), which is a great way to measure your financial growth.

Read: Creating a Budget

How To Create a Personal Balance Sheet

To get started, first identify a tool that you can use to track your assets and liabilities. A variety of digital tools are available, including the eMoney Client Portal, which was mentioned in Get Ready, Get Organized and Take Charge.  If you don’t want to use one of those options, a Microsoft Excel spreadsheet also works well.

Steps to creating a personal balance sheet

Step 1: List all of your financial assets.

  • Cash and Cash Equivalents – Cash on hand, checking accounts, savings/money market accounts, certificates of deposit, cash value of life insurance policies
  • Investments – Stocks, bonds, mutual funds, ETFs, annuities, private equity
  • Retirement Accounts – 401(k) / 403(b), IRA, Roth IRA, pensions
  • Business Ownership – Sole proprietorships, limited liability companies (LLCs), S-corporations, C-corporations, partnerships
  • Personal Property – house, investment/rental real estate, vehicles, home furnishings, other valuables (art, jewelry, collectibles)

Step 2: List all of your liabilities.

  • Real Estate – mortgages, home equity loans
  • Personal Property – car loans, unsecured personal loans, installment loans
  • Other Loans/Liabilities – student loans, credit card balances, unpaid taxes, unpaid medical bills

Step 3: Calculate your net worth.

  • Total all assets and then subtract all liabilities to calculate your net worth

How To Utilize a Personal Balance Sheet

Now that you have created your balance sheet, let’s look at some ways to use it for your benefit. After all, the ultimate goal of this tool is to provide intel to help you make smart financial decisions.

  • Use it as a report card – Periodically (at least annually) review and update your balance sheet. Is your net worth growing? Are you saving enough? Could you invest cash?
  • Adjust your budget – If you are unhappy with your level of debt or your investment balances, review your budget to see if you could pay down the debt or save more.
  • Consolidate accounts – Do you have similar accounts at several different institutions? Could they be consolidated to make it easier to manage and track?
  • Adjust your savings – Review your investment in relation to goals to determine if additional savings are needed.

Next Week

Thank you for your time this week. We hope you found this blog informative. Next week, join us as we discuss Setting Goals. In the meantime, should you have any questions, please feel free to reach out to your Oakworth Client Advisor.


Next Week: Setting Goals

Financial Literacy Resources

  • MyMoney.gov — Website run
    by FLEC that provides educational resources, checklists and personal finance calculators
  • takechargeamerica.org — Nonprofit that focuses on credit counseling, debt management and student loan counseling. This website contains a variety of financial tips and calculators.
  • consumerfinance.gov/consumer-tools/ — Website run by the Consumer Financial Protection Bureau. A guide for many commonly asked financial questions.

This document is being provided for informational and educational purposes and is not meant to be taken as specific advice. Oakworth Capital Bank does not provide tax or legal advice. All decisions regarding the tax and/or legal implications of these strategies should be discussed with your tax and/or legal advisors before being implemented.