Personal Balance Sheet

What is Your Non-Financial Net Worth?

(Draft -- You are looking at an early draft of this topic. It has not yet been proofed, and it will now doubt be massaged many times over for context, grammar, and clarity)

In business, one of the best ways to gauge the current financial condition of the business is the Financial Statements. The two most important components in the Financial Statements are the Income Statement (which compares the revenue coming in against the expenses required to generate that revenue – thus the profit or loss the business experiences) and the Balance Sheet (which compares what you own against what you owe – thus the business’ net worth). Good businessmen analyze their business’ financial statements monthly and make adjustments to improve the financial condition of the business. Most will graph the Income, Expenses, and Profit/Loss to see the trends.

I long ago started keeping financial statements on myself, so that I could keep up with the progress of my financial condition. However, I also added a little twist to just keeping Financial Statements. In addition to a Financial Balance Sheet – I have a Personal Balance Sheet. It works pretty much the same way, but measures my personal good and bad qualities instead of my finances.

Take a sheet of paper and draw a line lengthwise down the middle. On the left list your personal assets and on the right list your personal liabilities. The goal is to work on your liabilities and to turn them into your assets. This will only work if you are completely honest with yourself – as cheating at this is like cheating at Solitaire. I suggest you don’t share your Personal Balance Sheet with anyone.

Say for instance you are a good communicator, you dress well, you have a strong accounting background and you are comfortable with using computers to solve business problems. These are your assets and should be listed on the asset side of your Personal Balance Sheet.

On the other hand, let’s say your organizational skills are terrible as are your writing skills. You could use some heavy dental work and have never been able to motivate your subordinates to do a decent job for you – or they walk all over you. Those are examples of your liabilities. You will have many times the assets and liabilities than these examples – but you should get the point.

The goal is for you to identify your liabilities, prioritize them from worst to not so bad, and then to not just eliminate them (work on the worst ones first) as liabilities – but to go a step further to turn them into your better assets. Go to the dentist and fix those teeth to turn your smile into a great asset. Read self-help books and take classes that help with your other liabilities -- and you will be increasing your Personal Net Worth. Since your Personal Net Worth will always be a moving target – make a new balance sheet as often as monthly – and at least quarterly.

I find it best to attack your liabilities in such a way that you can start to quickly move some of them to the asset side of your Personal Balance Sheet. Take on only as many liabilities as you can work on at one time to be turning them into your assets. Attacking too many of your liabilities at one time is only going to have you with working on too many problems – none of which appear to ever be fully resolved.