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Your Guide to Creating and Using a Personal Balance Sheet

The first step to staying on top of your finances is understanding where you’re at right now. A personal balance sheet can help you achieve precisely that.

March 31, 2022

If you’ve ever wondered why you don’t seem to have quite enough money left over at the end of the month or why you’re usually feeling stressed about your finances, a personal balance sheet could be key to turning things around. 

It might seem like a scary, technical term reserved for businesses and accountants, but keeping a personal balance sheet is easier than it sounds and is the perfect tool for tackling your financial position.

Does that sound like something you could make use of? It’s time to learn exactly what a personal balance sheet is, why it’s so useful and how you can create and use one yourself.

What is a personal balance sheet?

Simply put, a personal balance sheet is a place to track your finances and all the key metrics needed to understand your situation. Also known as a personal financial statement, it usually contains the following:

  • Assets: Anything of value you own, including accounts and physical items

  • Liabilities: The total balances of any debt you owe

  • Net worth: The difference between your total assets and total liabilities 

Yes, it’s really that simple — yet the applications of understanding your assets and liabilities are surprisingly far-reaching.

Why keep a personal balance sheet?

Businesses use balance sheets with similar entries to track their finances. This helps them ensure they strike the right balance between investing in growth and staying within their means. So, why shouldn’t you do something similar? 

It’s tempting to let your funds do their own thing and bury your head in the sand, but this can result in your liabilities adding up and getting out of control. Sometimes, looking at the value of your debts or realizing you have a negative net worth is a much-needed wake-up call and helps you take that first step toward paying your loan balances. 

On the other hand, if you don’t have a full picture of your finances, you might end up unnecessarily stressed about money when you’re actually in a great financial position.

A personal balance sheet can also help you reach financial goals, such as retirement. Having a high net worth is the key to being financially independent because it ensures you have enough money put away to cover your expenses and any unforeseen emergencies.

How to create a personal balance sheet

You don’t need to be a technical whizz or an accountant to set up a personal balance sheet — just access to your own financial information and a calculator.

Good homes for your balance sheet are Excel spreadsheets, Google Sheets or even a pen and paper. Plus, there are plenty of templates floating around online if you find it daunting to start from scratch. 

Once you’ve decided where you feel comfortable keeping your records, simply follow the steps below.

1. Add up your assets

The first step is listing all your assets and their current value. 

Some of the more common assets include:

  • Checking accounts

  • Savings accounts

  • Retirement accounts, such as an IRA

  • Equity in real estate (but don’t include your mortgage, as that is a liability)

  • The market value of other valuable items (e.g., cars)

  • Cash value of life insurance

  • The value of any businesses you own

  • Accounts to save for children (e.g., a 529 plan)

It’s smart to check the current value of each account and update the numbers periodically, as your assets and what they’re worth can change over time.

Since a random list of numbers can be confusing to look at, it might help to put the entries above into categories based on how quickly you can access the money (or how liquid the asset is). For example, you can access money from a checking account instantly, but may need to wait a year to receive money from a certificate of deposit or decades for funds from a retirement account.

2. Add up your liabilities

Next, it’s time to move on to your liabilities.

Include not only how much you owe in total, but also the interest rates you pay to lenders and your monthly payments for each liability.

Common examples of liabilities include:

Again, you might want to list these in categories to get more clarity. 

You could order them from the smallest loan to the largest loan or the lowest interest rate to the highest interest rate. This helps you build a full picture of your finances.

3. Calculate your net worth

Your personal balance sheet really comes to life once you move on to calculating your net worth. 

As we’ve already seen, it’s pretty straightforward: Just add up the total value of your liabilities and subtract them from the total value of your assets.

If you use something like an Excel spreadsheet, you can get your computer to do the bulk of the work with some easy clicking and dragging. 

Remember, a negative net worth is possible. In fact, it’s pretty common — especially if you recently bought a house or you’re still paying off student loans. 

How to use a personal balance sheet

Once you’ve created your sheet, don’t just leave it sitting around to gather dust. Put it to good use by making it part of your overall financial planning

We’ve touched on a few ways to do this already, but let’s look at them in greater detail. 

Identify areas of stress

The way you use your personal balance sheet is ultimately up to you. However, looking at the numbers can give you an overall picture of your financial health. 

For instance, you might notice your total liabilities are higher than you realized. If you’ve listed the interest rates for all your liabilities, you might find that one loan has a significantly higher rate than the others, resulting in costly monthly payments that you struggle to make.

Or maybe you’ll realize you have a high net worth, but most of your assets aren’t very liquid, explaining why you’re constantly worried about money.

Study your sheet and get familiar with it. How does it relate to your financial situation?

Make necessary changes

Once you’ve identified some areas of stress, it’s time to start making changes. 

  • Do you need to tackle your debt aggressively to make your net worth positive? 

  • Do you need to prioritize paying off one of your loans due to its high interest rate?

  • Do you need to increase your liquid assets, so you have more money you can readily access?

The right actions to take will be different for everyone.

Plan for the future

Sometimes, it can be tough to make big financial decisions, like figuring out when you can afford to retire or whether you can financially support your kids through college. 

Seeing the numbers in front of you can give you the clues you need to find an answer. By working out your net worth (and how much of it is in liquid accounts), you’ll know how much you can afford to dedicate to these kinds of financial goals.

However, if you find out you’ve ended up with more questions than answers, it may be time to consult a financial advisor. 


Ready to take control?

A personal balance sheet is something that’s important to have in your financial toolbox to help you make sense of your unique situation and grow your wealth. It might sound daunting to build everything from scratch, but it’s really as simple as working out your total assets and liabilities. 

Have you discovered your debt is holding you back and it’s time to tackle it head-on? The Tally† can help you pay off your credit card debt by automating your payments and consolidating your credit cards into a lower-interest line of credit. 

To get the benefits of a Tally line of credit, you must qualify for and accept a Tally line of credit. The APR (which is the same as your interest rate) will be between 7.90% and 29.99% per year and will be based on your credit history. The APR will vary with the market based on the Prime Rate. Annual fees range from $0 - $300.