Having a personal balance sheet helps to know what you own and what you owe! It’s a pretty powerful tool to take your finances to the next level. It’s a statement wherein you can jot down your assets and liabilities. The difference between your assets and liabilities shows your personal net worth.
Before getting started, pull together your bank statements and other proofs of the liabilities. Then, list down your assets like the bank balance, investments, home value, and value of other assets. Take a sum of all the assets to arrive at the total value of your assets.
Further, list down your liabilities like the car loan, home loan, credit card balances and remaining balances in other loans. The sum of all the liabilities will show the value of the money you owe.
Ideally, your net worth needs to be positive, which means the money you own is greater than the money you owe. Don’t lose heart if it’s negative. As you keep repaying your loans, your net worth is going to increase gradually.
Yet, another critical thing in asset management is what kind of assets you need to own. You must always try to own those assets which increase in value and involve lesser maintenance cost. At the end, it’s all about how much you can really use. Simply accumulating things which you don’t need leads to blocking money in unproductive stuff. It’ll be wise to be aware of what you actually use and what you can get rid of.
