While you may think the idea of having a family balance sheet is reserved only for the millionaires and billionaires, we recommend all of our clients maintain one. Having a snapshot of your assets and liabilities all on one page gives you a broad overview of your financial position and helps make informed decisions on topics like debt payoffs and savings allocations.

1) It helps build perspective. Having a list of all your assets side by side gives you an immediate glimpse into how your general asset classes compare to each other. Having this information allows you to compare your retirement assets to your regular brokerage accounts to the value of your personal residence. Diversification of assets is critical to your longterm financial success. Having a balance sheet can assist in finding assets that are over or under inflated relative to your goals and aspirations.

2) It allows you to make debt payoff decisions. On your personal balance sheet, be sure to list out each liability with the amount and corresponding interest rate. When cash frees up on your balance sheet, you can pay off liabilities in a sequence that optimizes your cash flow.

3) You can see the value of your home. Yes, your home counts as an asset, and it's a big one, too! While some markers of financial wealth do not include homes because they are considered illiquid, it's still a very big part of your overall financial picture and will impact your financial decision making. Having your home on your balance sheet lets you instantly capture your home's net equity position [the value of your home minus the mortgage]. This number can impact decisions like financing a larger home or how much net equity could offset retirement funding in the future.

4) It lets you keep track of your assets so they don't roll off your memory. Managing your asset position with a balance sheet lets you keep track of 401k accounts from previous employers, multiple HSA accounts, flight credits, old pensions and other valuable assets! Without a balance sheet, you're typically relying on snail mail from the asset custodian to jog your memory of any outstanding assets that are in your name. Your balance sheet puts you in contol of the process.

5) Balance sheets put the emphasis on your net worth and not your income. Yes, we all need basic income to pay for our daily needs and wants, including mortgage/rent, food, etc. While income is great, assets are even better. Many assets hold their value over time AND produce income to live from. Without a significant focus on assets, it can be difficult to accumulate wealth in a way that allows for financial freedom.