Personal Balance Sheet

ThinkWiser Accountants Doreen is a local Accounting firm based in the northern suburbs of Melbourne and provides Accounting, Bookkeeping and Taxation services to small businesses & individuals.

Quite a lot of us can relate to the experience of looking at our bank or credit statement, completely shocked at just how much we actually spent in the month. Difficulty in proper budgeting also harms our prospects for improving our long-term financial well-being. Helping avoid such issues is exactly why a personal balance sheet is very important.

The Importance of Personal Balance Sheet

A personal balance sheet is a financial statement that contains the sum of your total assets minus their total liabilities. Having one is crucial for any financial planning as it helps give you a better assessment of your net worth and what your financial position currently is; it is the starting point for finding precisely what improvements can be made. It allows you to find out how close (or far) you are at the moment towards reaching your monetary goals such as clearing of a debt or saving up for an investment.

ThinkWiser Accountants Doreen can help you in preparing a balance sheet and at the same time help you in understanding the importance of it.

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How to Create a Personal Balance Sheet?

For creating a personal balance sheet, you would need the use of an excel sheet. Create two columns, one for assets and one for liabilities. Assets are everything that you own that can generate future cash flow. This can include your investments, bank savings, your house, your car, jewellery, and even such things a licensed logo. Liabilities, meanwhile, are merely what you owe to others e.g. your debt.

The second step is to find and gather all your relevant financial documents such as your credit statements, bank and investment balances, valuation reports, etc. Once you’ve done so, list their values down on the excel sheet in the relevant column, being careful to ensure that all figures represent their amount. Afterwards, just subtract your total liabilities from your total assets. The figure you arrive at is your total net worth.

Assessing Your Financial Details

Once you’ve completed your personal balance sheet and discovered your net worth, it is time to compare and assess the figures. Critically evaluate in which areas you can cut down on or sell in order to improve your financial standing. For example, you may check your current monthly repayments on your car mortgage and realize that it is among the most detrimental factors to your savings. Trading it in with a more affordable one would be a wise option.

Looking How to create a profit loss statement?

It is important to periodically update your personal balance sheet every once in a quarter or half-year. This way you are always on track regarding your finances and whether your prospects are trending upwards or downwards.

If you need any guidance on this, please contact Accountants Doreen on 039005 3762 or email us at [email protected]

Suite 22, Level 1 797 Plenty Rd
South Morang VIC 3752

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