What is a Balance Sheet?
In investing, it's important to understand what we are investing in. One of the tools to evaluate a company is called its Balance Sheet, which is a financial statement of what the company owns and owes at a given point in time. A balance sheet is snapshot of what the company is worth.
We all can also have a personal balance sheet. If we have done our personal Mid Year Review, another thing we can do is assess everything we each own and owe. I do this regularly (every six months to a year) using Google Sheets (or Numbers or you can use any other spreadsheet program like MS Excel, or even just in your Money Journal using a pen and paper), and I compare the difference over time.
The basic elements are:
On the Asset side: How much money do I have in my wallet, in my accounts, what people owe me? Anything I own that has value, I put it on the list. Each item gets its own row in the spreadsheet.
On the Liabilities side: How much money do I owe to other people, to a bank, on credit cards? Student loans? What is the balance owed on a mortgage or car note? Again, each number gets its own row.
Add up the Assets and add up the Liabilities, and then subtract the Liabilities from the Assets, and the result will be our financial Net Worth.
Now of course, we are all priceless human beings and our personal financial net worth is just one aspect of our lives! But it's useful to know where we are financially, and this tool can help.
Let me know if you have any questions about it, by asking in the chat! And as always, thanks for reading this. It's a balancing act!
What is Money? is HERE
What is Investing? is HERE