What so Personal about Personal Balance Sheet?
Maintaining financial condition is not only the responsibility of companies but also individuals. As we grow, we have more needs, such as gym membership or online music platform subscription. Furthermore, we might set aside some money for investment. If we don’t keep a record of our wealth, we will not know where our money goes. This is where the personal balance sheet takes part.
Balancing Your Wealth is Just a Sheet Away
The personal balance sheet is basically a balance sheet that displays a comprehensive note of our financial state. Commonly, it consists of three parts. The first is assets. Assets are things that considered valuable things, like cars and properties. The second part is the liabilities. Liabilities are basically things that we owe, like loan debt. The last part is the net worth. It is obtained by this formula: assets minus liabilities.
Why is It Favorable for Tracking Our Personal Finances?
- It helps us to get acquainted with our own financial condition. By having a detailed note of our assets, we will be able to track where we spend our money. Moreover, we also can recognize the amount of money that we save. The personal balance sheet is a great medium to get to know ourselves better.
- It acts as a motivation to go into overdrive. As mentioned above, this balance sheet reflects our assets and our liabilities. Whether you realize or not, the numbers on the sheet can motivate us to save more, invest more and remind us to pay our debts in order to bring our net worth into the positive side.
- It assists us in adjusting our lifestyle. After putting the tremendous numbers of our transactions, we finally find out the cash that we save and splurge. Then, after we get the net worth, we might think about where we should save our money or what budget we should reduce. By having a personal balance sheet, we will have a guide to control our cash flow.
When and How We Should Create Our Own Balance Sheet?
Since it is our personal money tracker, we can personalize the time for arranging the balance sheet. However, the ideal time to arrange a personal balance sheet is twice a year or every six months.
Arranging balance sheet surely needs effort but we believe that you have the ability to bringing your net worth to the positive financial condition. Now, are you ready, people?
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