How to Do a Balance Sheet

A balance sheet represents a summary of your assets and liabilities. In one glance, you can see how healthy or unhealthy your finances are. Creating a balance sheet isn't difficult. You don't need fancy bookkeeping software, just a pad and pencil.

Instructions

1. Create two columns on a sheet of paper by drawing a line down the middle of it. Head one column assets and the other liabilities.

2. Record your assets. This would include your cash, car, house, jewelry, computers and any other item you own. Include stocks and bonds and the estimated worth of your household furnishings. If you don't know the value of an asset, estimate the amount.

3. List your liabilities. This is the amount you owe on each of the assets listed. For example if you bought your car for $15,000 and you still owe $5,000 you would put $5,000 in the row for car under liabilities.

4. Assemble your monthly bills under liabilities. You should know the total for each bill or you can estimate the totals. Your credit card bills will tell you the minimum amount you must pay that month and the balance you owe. Include your car, mortgage and insurance payments.

5. Include any interest you received in your assets and any finance charges you incurred in your liabilities.

6. Make a line for totals. Add up all your assets and add up all your liabilities and enter the amounts in the total. Subtract your liabilities from your assets. If this is a positive number, you are "in the black," which is where you always want your balance sheet to be.

Tips & Warnings

• Determine the value of your assets today, not what what they were worth when you bought them new. Some of your assets will have increased in value since you bought them and some will have decreased.

• This can also be done with a computer using spreadsheet software.

• Don't be too alarmed if this is a negative number because you are including items, such as your home, which you will be paying for with future cash that you will receive in the form of your pay check.