Like other people globally, Canadians often have new year resolutions and dreams of improving their financial situation. However, these goals never seem to see the light of day. In fact, a report has it that 80% of these dreams don't reach the quarter-year mark. Most fail by the second week of February. Suppose you are planning to invest more, cut expenses, pay off your debts, apply for financing, or get a clear snapshot of your financial life. In that case, a balance sheet can be a real eye-opener.
What is a personal balance sheet?
Also referred to as a personal financial statement, a personal balance sheet is a document that outlines an individual's personal financial position at a given time, detailing the liabilities, assets.
Do you know your net worth? Find out your worth by creating a personal balance sheet. It helps you find out if you are on the right path to achieving your goals. A personal balance sheet will highlight your asset values and the total of all debts you have. The result is how much you are worth.
Unlike an expenses spreadsheet or a budget, a financial statement gives you a bigger picture than your day-to-day spending habits. While it may take you some time to create a personal balance sheet, it is totally worth it. It shows the difference between assets and liabilities- if your assets are more, then it means you can sell your assets to pay off your debts. If the liabilities are more, then you have a negative net worth. Additionally, knowing your financial position allows you to avoid unnecessary declined credit applications. It is also helpful to see where the concentration of your net worth sits. If you have all of your net worth tied up in your principal residence equity and have no other assets will that support your long-term goals?