Are You On Track? Using a Personal Balance Sheet to Map Your Financial Route

Posted By on Jul 11, 2016|0 comments

Technology is advancing faster than many of us can keep up with. While I am undoubtedly a big advocate of using technology, I do believe there is such a thing as being overloaded. We are beginning to see the use of financial software such as eMoney and MoneyGuidePro becoming more pronounced. Instead of relying on the latest application to crunch numbers for you, I suggest creating a personal balance sheet for yourself and your clients.

There are multiple ways in which you can create your balance sheet, either with a pen and paper or simply by using a spreadsheet. One of the significant benefits of having a personal balance sheet is that it is quick to implement and allows you to regularly update your clients. It also enables you to become more aware of your client’s net worth and more importantly, what impacts it.

I personally use a balance sheet to monitor where I am going and how I can increase my wealth by adding more assets. There are two ways in which you can do this. The first is to save more money from your income. The second method is to invest in items that increase in value over time.

Lessen Your Debt to Increase Your Assets

There is; however, a third way to increase your wealth. This can be done by paying off debt. Reducing your debt has two positives. Not only does it minimize the led weight that is dragging down your net worth, but it lowers your monthly interest payment, allowing you to save more in order to help increase your assets.

As a sales trainer for financial advisors, I am a big advocate of helping clients determine their net worth, which is calculated by subtracting liabilities from assets. Simply put, your net worth is how much you own minus how much you owe.

Liabilities include unpaid credit card balances, automobile loans, student loans and home mortgages. Your assets are broken down into current assets, long-term securities (retirement accounts), real estate, personal business (if you are a business owner or entrepreneur) and personal property (jewelry, art, and cars).

Your personal balance sheet should be updated once a year. When updating my sheet, I track two things: net worth and assets growth. Net worth is the remainder after subtracting liabilities from assets. If this number continues to rise, I know my wealth is growing.

The second item I monitor is the value of assets or assets growth. This helps to show if what I am investing in is maturing. Tracking these two things over time has provided me with a picture of where I’m currently at financially and what direction I am heading.

Updating Your Personal Balance Sheet to Assess Your Current and Future Financial Placement

For those of you who enjoy spreadsheets, it may be tempting to continually analyze your personal balance sheet. However, I recommend only updating your sheet annually, or when contemplating a big investment opportunity or paying off debt. Otherwise, it is too easy to get caught up on whether your wealth is rising or falling.

In order to update your personal balance sheet, you will need to collect year-end statements for all the items you own. It may be difficult to estimate the worth of your personal property and you will likely have to guess when it comes to determining the value of your cars, jewelry and artwork. When it comes to estimating property value, you may choose to use real estate database sites such as These databases provide quick results, but you should be aware that the more unique the design or location of your home is, the less likely sites like Zillow are to accurately assess your home value.

Below is an example of a personal balance sheet with specific items included under each category. Please be aware that if you have several savings accounts, an IRA, ROTH and or 401k, you should list these separately and total the entire category.

Personal Balance Sheet

After you have finished updating your personal balance sheet, I recommend offering this resource to your clients. Tracking your client’s net worth is beneficial and easy to do. You will also gain satisfaction in knowing you are helping your clients not only understand where they are at, but how they too can reach their financial goals.

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