How to Create a Personal Balance Sheet and Calculate Your Net Worth (Free Excel Templated Included)

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Estimating your financial situation can get confusing and frustrating at times. So creating a personal balance sheet could be one of the best ways to assess your financial situation.

A personal balance sheet can provide you the clarity about:

  1. How much money you owe to people
  2. And what worth of assets you own

known as assets and liabilities in financial terms.

Creating a personal balance sheet can help you to manage your finances in a better way and make adjustments to your lifestyle accordingly. This helps you in the long term to have a successful financial future.

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What is a Personal Balance Sheet?

All structured organizations have proper systems for maintaining their balance sheet which comprises of:

  • Assets – Items that an organization holds like a bank account, vehicles, equipment, and properties, etc.
  • Liabilities – Debts that an organization owes
  • Equity – Assets minus Liabilities, in other words, your earnings  

So an organization’s balance sheet provides a picture of its financial status at any given time. And a personal balance sheet does the same for an individual.

A personal balance sheet helps you to calculate your net worth by comparing your assets and liabilities.

To create your personal balance sheet, the first thing you need to figure out is how you want to make it. Of course, you can write your assets and liabilities on paper and use a calculator to calculate them, but a more efficient way to do this is using excel. Also, there are a number of pre-designed personal balance sheet excel templates available on the internet.

Now let us consider a practical example of creating a personal balance sheet in excel with hypothetical data.

Calculate your Assets

Assets are all the valuable items that you own. Since you own several items, so for calculation purposes you can term everything as an asset that is worth more than $500.

Typically your assets can be:

  • Cash
  • Investments like: 401(k), IRA or, mutual funds, etc
  • Properties like: lands, physical infrastructures, vehicles, equipment, jewelry, etc
  • The tax that you’ve already paid

The simpler way to term anything as an asset is to evaluate if it can be sold or not. If it can be sold then you can consider it as an asset.

Generally, most businesses state the total worth of all the assets but for simplicity’s sake, you can list all your assets separately.

Sample Assets in a Personal Balance Sheet

Assets
Fixed Assets

Cash

$7,500

Jewelry

$3,300
Investments

401(k)

$7,100

IRA

$6,300

Mutual Funds

$2,700

Stock Market Shares

$1,500
Property

48 Grant Ave Residential Land

$269,000

1119 Vincennes St – Rental Property

$430,000

2008 Audi A6

$8,500
Total Assets$735,900

 

Calculate your Liabilities

Liabilities are the debts you owe to other people that includes bank loan, credit card payments, or your friends, etc.

Here are some typical types of liabilities:

  • Credit Card Balance
  • Student Loans
  • Property Mortgage
  • Cell Phone Installments
  • Insurance Premiums
  • Vehicle Installments

Please note that certain type of insurances which matures after a specific period remains liability until you’re paying its premium.  When matures, it becomes an asset. For example Life Insurance for which you have the flexibility to choose a 5-20 year plan generally.

Another confusion is the interest and principal of an outstanding loan. Let’s understand this with the help of a simple example.

Example:

Let’s consider that you owe $1000 to a bank and you’re charged $20 interest at the end of the billing cycle and your total outstanding amount becomes $1020:

  • Case1 – You decide to pay $120: In this scenario $20 has been paid off from the interest and $100 from your principal amount. Your liability on the balance sheet is now $900
  • Case2 – You decide to pay $10: In this case, $10 has been paid off only from the charged interest your liability on the balance sheet is now $1010

To put it in simple words, liability is the total amount that you require to pay today for clearing your debt.

Short-term and Long-term Liabilities:

Anything which you owe within the period of 1 year is considered a short-term liability and those which are due over one year are considered as long-term liabilities.

Remember, it is not necessary to separately categorize your short-term and long-term liabilities but doing so will provide clarity.

Sample Liabilities in a Personal Balance Sheet

Liabilities
Short-Term Liabilities

Student Loan Principal

$3,500

1119 Vincennes St – Rental Property Mortgage

$16,500

Credit Card Loan Instalment

$1,500

Vehicle Installment

$750
Long-Term Liabilities

Student Loan Principal

$40,000

1119 Vincennes St – Rental Property Mortgage

$110,000

Credit Card Loan Instalment

$30,000

Vehicle Installment

$1,800
Total Liabilities$204,050

 

Calculate Your Net Worth

Now that we have the total sum of our assets and liabilities, we can calculate our net worth by subtracting liabilities from the assets. In our hypothetical case net worth is $531,850. You can calculate your net worth following the same process.

If you have a positive net worth, Congratulations! You’re on the right track, if not, don’t get discouraged.

There are ways through which you can adjust your lifestyle to manage your expenses better and become financially successful.

Why Personal Balance Sheet Can be Helpful?

A personal balance sheet provides you the insight into your financial situation. Once you have a clear picture of your finances, you can start planning to pay off your liabilities and increase your assets.

Also, a personal balance sheet highlights your spending habits which give a preview of your lifestyle choices. In case your net worth is negative you can make the necessary adjustments to pursue your financial goals better.

To achieve your financial freedom, you need to remodel your saving plans starting from today. If you want to learn efficient approaches for saving money then our blogpost: “How to get Financial Freedom – Millionaires Approach towards Saving Money” might interest you.

Personal Balance Sheet Template Excel

If you’re looking to create your personal balance sheet, you can use the above method to do it manually or find multiple pre-designed personal balance sheet excel templates here:

  1. Balance sheet Excel – Microsoft Office templates – Office 365
  2. Financial Balance Sheet Template
  3. Personal Financial Statement Template


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