A personal financial balance sheet shows you a snapshot of your financial health: how much money and assets you have, how much debt and liabilities you have, and what your net worth is when you subtract your liabilities from your assets. Unlike a budget where you track how much money is coming in as income and how much money is going out as expenses, a balance sheet tracks how much you have at a fixed point in time. Even businesses, the government, and non-profits use a balance sheet to measure their financial strength. But a financial balance sheet isn’t the only thing we have nor is it the most important. We also have to focus on our personal life balance sheet. What is it and what’s the difference? The table below shows you what a personal balance sheet looks like.
A life balance sheet is not much different from a financial one except that it is far more valuable in my opinion. The best investment anyone can make is in YOURSELF. It is investing in your education, knowledge, expertise, and skills. Although your financial assets and liabilities can come and go, your life balance sheet is priceless. Even if you took all the wealth away from Bill Gates, because of the knowledge he has, the relationships he has cultivated, and the skills he has acquired, he will not have a problem becoming rich again! That is because he has a very strong life balance sheet. The table below shows you what it is.
The good thing about life liabilities is that they can be used as leverage to become assets. Once you recognize your lack of skills and knowledge, you know what you need to learn and get educated on. Unlike a financial balance sheet, your life balance sheet is dependent solely on your ability to recognize and understand it, and then work hard to overcome it. The reason this is important is that no matter where you are financially, as long as you concentrate on your life balance sheet, you can become financially independent. Remember, the balance sheet is a fixed point in time, as long as you continue to improve and get better, your balance sheet will too! Having a good financial balance sheet however doesn’t necessarily mean a good life one. Looking to increase your life assets, decrease life liabilities, and have a stronger life foundation and balance sheet? Follow these steps and ask the SMART questions, they will generate SMART answers!
- Where Do You Want to Go? Set SMART Goals and continue to make them SMARTER. You will need to know where you want to go in life and what you want to do. This gives you a target and purpose to aim for.
- Where Are You Now? You will need to be honest with yourself on your life assets and life liabilities. If you are not or are in denial and overconfident of a skill you don’t have, it could set you back when it is discovered. This also helps you know what you need to work on.
- How Will You Get There? Once you have set your purpose and goals (Point B), and have an honest assessment of your current situation (Point A), you will need to map out how to get to Point B. This may be through getting a mentor, learning a new skill, or going back to school. You can click here to get access to top online education with elite universities for free! You may want a career change and start your own business, or rebrand yourself so people know your capabilities. The bottom line is that in today’s economy and marketplace, the big is no longer beating the small. The fast are now beating the slow. To be fast, you will have to build up your life balance sheet and come from a position of strength!
Once you have the right priorities set and focus on your life balance sheet, then it is much easier to get a stronger financial one. If not on a solid foundation, then your financial balance sheet is not as stable and secure.