SECRETS OF SELF-MADE MILLIONAIRES
CHAPTER 5 THE FOUR LEVELS OF WEALTH
Your Personal Balance Sheet
Personal Balance Sheet (Cont’d)
Your Personal Balance Sheet shows your financial strength and stability at a specific point in time. It tells you how much you own (your assets), how much you owe (your liabilities) and how much is left over when you have deducted what you owe from what you own (your net worth).Your net worth is the traditional measure of your wealth. In other words your Assets = Liabilities + Net Worth (Similarly, Net Worth = Assets – Liabilities). So right now, I want you to spend a couple of minutes to complete your personal balance sheet the table below. If you have access to a computer, I suggest you key in the figures into a Microsoft Excel spreadsheet (or any other spreadsheet application), so you can do updates easily. You can download a ready-made template from my resource website at www.adam-khoo.com/bizandmoneytips.html and go to the section under ‘Free Business and Money-Making Downloads’. Personal Balance Sheet Assets
Liabilities & Net Worth
Liquid assets
Short Term Liabilities
Cash
$
Credit card balance
$
Sav/Curr account
$
Unpaid bills
$
Brokerage Account
$
Ready credit
$
Tax owed
$
Housing Value
$
Car value
$
Club membership
$
Total Assets
$
Net Worth (Total A – Total L) Total Liabilities & Net Worth
$
$
* CPF is a compulsory savings plan for Singapore citizens and 401 (k) is a type of employer-sponsored retirement savings plan for United States citizens.
You’ve completed your Personal Balance Sheet. Good, now you have a true picture of your current level of wealth. Although it may feel good owning assets worth $800,000, if you have a jumbo mortgages and loans of $720,000, you are really only worth $80,000. A sobering thought. Are your assets a lot more than your liabilities or is the reverse true? As you take a look at your Balance Sheet, take note of whether you have more Positive Cash Flow Assets (rich mentality) or a lot more Negative Cash Flow Assets (middle class mentality). Once you have done up your Balance Sheet, you should update it every six months with the goal of Increasing your assets (especially the positive cash flow ones), Reducing your liabilities and hence Increasing your net worth.
Personal Income Statement
Assets (Cash+)
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Assets (Cash–)
Fixed deposit
$
Long Term Liabilities
Bonds
$
Housing mortgage
*CPF/401(k)
$
Second house mortgage $
Stocks
$
Car(s) mortgage
$
Mutual funds
$
Businesses
$
Intellectual property
$
Total Liabilities
$
Insurance cash value
$
$
This is the second section of your financial report card. Your personal income statement will tell you how much you are earning (income), how much you are spending (expenses), and how much you have left over to save and invest over a particular period of time (one month, a few months or one year). First, fill in all your sources of income. Your income is divided into two categories: active and passive. Most people have a single source of active income (usually their salary) and no passive income sources.
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