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The Spokesman-Review Newspaper
Spokane, Washington  Est. May 19, 1883

Start Fiscal Outline With Balance Sheet Totaling Assets, Liabilities Tells You Where You Stand

Associated Press

If you yearn to get better organized financially in 1996 than you have been in the past, a relatively simple procedure can get you off to a good start in that direction.

The task in question is to draw up your own personal or family balance sheet - or, in plainer English, a list of assets and debts.

Once you total up your assets and liabilities, you can subtract what you owe from what you own to get a number known as your net worth. This figure can tell you a lot about how you are progressing toward your financial goals.

The biggest asset on many personal net worth statements in a home, which should be listed according to your best estimate of current market value.

The biggest liability on many of these same people’s balance sheets will be the mortgage balance due on the property.

People who don’t own their residences may still have substantial assets to count up. Mutual funds, stocks, bonds and other financial investments can be listed by their current market value, as published in the latest newspaper tables.

Bank certificates of deposit and other investments that aren’t continuously traded can be valued according to the most recent statement you received from the issuing institution.

Personal property also should be tallied as completely as possible, including your car, your furniture, the family heirloom kept in your safe deposit box, and the stamp collection in your attic.

Any debts you owe on any of these items, such as the balance due on loans for your car or home furnishings, should be included in the liabilities column.

If an item you own is worth less than the debt you still owe on it, as can happen fairly commonly these days, it shouldn’t be overlooked. List both its value as an asset and its debt liability, to reflect accurately the negative contribution it makes to your net worth.

Make sure, too, to include all current outstanding balances on credit cards, home equity loans and other lines of credit.

Pleasant or painful, the tabulation will provide you with a clear-eyed look at where you stand, and a starting point for figuring out what actions need to be taken.

At the very least, your balance sheet can help you to plan better. For instance, it can be a valuable aid in deciding whether you can afford some big-ticket consumer item on a much sounder basis than merely looking to see whether you can squeeze the monthly payments out of your cash flow.