Balance Sheet

Balance Sheet

A personal balance sheet is a complete listing of all of your assets (what you own) and liabilities (what you owe) at a particular point in time. The values shown should be the fair market value of the assets and liabilities on the chosen date. Net worth is also shown which is total assets minus total liabilities. The date of valuation should figure prominently in the title.

Assets are usually presented in order from highest to lowest liquidity. Liabilities are usually presented from shortest term to longest term obligation. It is best practice to indicate ownership and titling of each asset as well as any co-signers on loans. The interest rate being charged for each loan.

Assets

One possible way to break down assets is into the following categories:

• Cash and Cash Equivalents
• Investment Assets
• Personal Use Property

Cash and Cash Equivalents include checking accounts, savings accounts, money market accounts, CDs, and treasury bills. These funds are readily available for any sudden expenses without concern for fluctuations in market prices and are used for day-to-day expenses and unexpected contingencies. This is covered in more detail in Emergency Fund Planning.

Investment Assets are held to provide growth in anticipation of funding future liabilities. These funds include stocks, bonds, mutual funds, ETFs, deferred annuities, and cash value life insurance. They also include less liquid investments such as retirement accounts, rental real estate, and business ownership.

Personal Use Property is owned for the service it provides. It includes homes, furniture, cars, art, jewelry, and collectibles. It is often very illiquid and might require significant time and effort to be sold for its fair market value. It might also be difficult to determine the value of such an asset and might need a professional appraisal if an accurate value is needed. The fair market value of these assets should deduct any anticipated costs of selling the assets.

Liabilities

Liabilities include short-term obligations such as unpaid bills or credit card debt and long-term obligations such as car loans, student loans, and mortgages. Sometimes the balance sheet will distinguish between current liabilities representing payments due within one year and long-term debt of longer than one year. Current liabilities are often debts of convenience while long-term debts are purchases of personal use property financed over the years of use.

Sample Balance Sheet