Balance Sheet

In addition to understanding your cash flow, understanding where you are today is important as well. Putting together your balance sheet (aka Net Worth Statement) is how you do this. You need to put together a list of all of your assets and all of your liabilities. 

• Group all of your assets together and add them up.

• Group all of your liabilities together and add them up. 

• Subtract your liabilities from your assets and this will tell you what your net worth is. 

Below is an example of a Balance Sheeet:

Assets

• Checking account = $5,000

• 401k = $10,000

• IRA = $15,000

• Roth IRA = 20,000

• Health Savings Account = $5,000

• Taxable Investment Account = $25,000

• Home = $300,000

• Car = $25,000

  • Total Assets = $405,000

Liabilities 

• Mortage on Home = $250,000

• Loan on Car = $15,000

  • Total Liabilities = $265,000

• Net Worth = $140,000

Notice that there are no credit cards in the balance sheet above. This is because it is assumed that if you are using credit cards, you are paying off the full balance each month and only using the credit cards to accumulate rewards or cash back. You should not be investing yet if you are still holding a credit card balance past a month.