In this era where the economic environment is so unpredictable with uncertainties in terms of income flows, managing ones expenses is necessary, particularly through a simple personal balance sheet.
The balance sheet helps you to determine your net worth by considering your assets and liabilities. It also reveals your income against what you are supposed to spend.
In most instances, it will also help you in setting your financial goals.
So, let’s see how you can make a balance sheet;
Remember. The rule is that you have to make it simple so as to help you understand your financial performance.
First, list your assets including your cash at the bank or at hand, land, car, other personal properties and anything else you own and value them.
Then, list your liabilities including loans, rental fees amongst other expenses in terms of monetary value.
Then balance your assets and liabilities to create your net worth. You will then be able to determine where you may need improvements and more importantly how you place your goals.
Your positive balance is when your assets outweigh your liabilities, while a moderate sheet is when both assets and liabilities remain balanced while the worst case scenario is when liabilities outweigh your assets.
It is always important to regularly review and update your balance sheet to make some adjustments in case you of more inflows or additional expenditures.