Transcripts
1. Introduction: Hi there. My name is Josh and I'm a
business consultant for magnetics consulting base
of Saskatoon, Canada. And today I'm going to teach you how to make your
own balance sheet. Now, what is the balance sheet? What's the type of
financial statement that is usually used by
companies in order to determine their
net worth by looking at their current assets
and current liabilities. However, this type of financial statement can
actually be used by individuals as well for the same reason to
look at their assets, liabilities, and determine
their net worth.
2. Course Objective: Okay, so let's get started
on the class here. So it's under the category of personal financial
management and how to make your own
personal balance sheet. The course objective here is to improve your
self-awareness of personal financial situation by creating a personal
balance sheet. Personal financial statements. Balance sheets and income
statements help us to use real numbers to better understand our
financial situations. They're normally used for
business settings were also very useful for
personal finance. And so that's what we're
focusing on today, is the balance sheet
in another class, I covered the income statement. So the personal balance sheet, it's important financial
document that can be applied to personally use shows financial position on a given date and chosen individuals
financial assets and liabilities to
determine their net worth, useful for tracking financial
position over time. So it's 11 specific
day as compared to the income statement which is for a given period of time. So before we get into the
specifics of the balance sheet, just a couple of differences. The main differences
here between a balance sheet and
an income statement. The balance sheet
is a snapshot of the financial position for a single day showing
what an individual owns versus what they owe. Whereas an income statement
is a recording of regular income and expenses
for a given time period, such as a month or
year that shows typical money inflow
versus typical outflow. One, the balance sheet, it's just a snapshot of one day, whereas the income
statement could be a week, or a month, or a quarter, or a year's worth of
cash, inflow and outflow. Then just one last
quick summary here. The main objectives of
each financial statement. So a balance sheet is comparing, Do you own more than you owe? Are your assets greater
than your liabilities? So it's just a picture of your assets and liabilities
at one given time. Whereas an income statement, do you receive more
than you spent. So it's looking at cash inflow or money inflow
versus money outflow. Do you have more coming
in than going out? And the income
statement, remember, is for a given period of time. So that could be a month, that could be a quarter,
that could be a year. Whereas the balance sheet
is just a look at one day.
3. Assets Explained: So next up we're going
to look at the main two components of the balance sheet, which are assets
and liabilities. For starters, and asset is a resource with economic value. So some examples of personal assets would
be cash savings. That can be money in a savings
account or GIC vehicles. So motor vehicles, cars, trucks, watercraft,
things like that. Property, which could
be plots of land, could be farmland,
could be acreage, could be condos,
could be houses, any type of real
property that you own. And then investments can be
a variety of things as well. That could be mutual
funds, stocks, Crypto, investment in accompany,
something like that, then receivables, so that's
money that you're being owed. So that could be tax
that you're being owed or if you loan someone else some money and
you're being owed, that that would be
a form of an asset. And the kid in the
case of receivable. Now here's a longer list of some personal
assets that you may have or you may want to include. So there's a long list and
this isn't exhaustive. There may be some other ones. Keep in mind, you
probably don't want to include them if they are less than $500 or 1,000, that depends on you, but items
that are worth $10 20th, it's not really worth
putting on there. So a few ideas would
be things like cash, checking account,
money, savings account, GI sees stocks, mutual funds, cryptocurrencies, money
being owed to you. Maybe a friend or family
member owes you money. Maybe your employer does. Maybe you have someone renting rental unit that you
have anything like that, taxes being owed to
you? Motor vehicles. So you might have a car
or a truck, or a van, or a motorcycle, maybe even an expensive bicycle that
could be counted as well. Water vehicles, maybe of
a boat or a sea to land. So maybe you own some farmland or an acreage or something like that
where there's actual know, there's no actual
structures built on it, but you own the land, property. So maybe you own a
house, townhouse, and apartment, a
cottage, a cabin, something like that.
Shared ownership. So maybe you own some
property with someone else. Maybe you want accompany with someone else,
Something like that. You include the market
value their electronics, especially for more
expensive electronics, if you have a nice new laptop that's worth a couple
of thousand dollars or an expensive camera,
something like that. Equipment that could even
be like workout equipment, training equipment,
something like that. If you have like a
squat rack that's worth $1,500, you might
want to include that, especially if that's
the resale value, if you could sell it
today for that much. Leisure items can be a
variety of different things. Maybe you have a
trampoline that you could resell $1,000 jewelry. If you have expensive
jewelry or even art, some art is worth
a lot of money. And again, for this you want to try and find the
current market value. But hopefully this gives you
some assistance in coming up with some ideas for
assets that you might want to list on
your balance sheet.
4. Liabilities Explained: Next up after assets,
we have liabilities. So what is the liability? It's debt, money owing
or financial obligation. So some examples of
liabilities when it comes to personal finance would be
things like credit card debt, mortgage payments or
mortgage principal owing, student loans, vehicle
loans, tax payable. So if you're only taxes and then other payables, if
you owe someone money, something like that,
basically just money outstanding that you owe to
someone or some institution. Alright, here's a longer list of some ideas for
personal liabilities that you may have
and you may want to include on your balance sheet. So some of the options would
be things like student loan, car loan, credit card debt. And remember, this is not the original amounts of your student loan
or your car loan. It's what you're currently owing as of the date that you're doing
your balance sheet, line of credit, debt, mortgage, rent owed,
personal loan. Maybe you owe a friend or
family member some money. A payday loan, tax
owed furniture loan. So maybe you bought
some furniture and you took out a
loan to get that. Where did some financing through the company, utilities
outstanding. So maybe you are late
on a utility bill, your intranet bill, your phone bill is
something like that. Where maybe something
like a vet bill, maybe you had a pet that needed some surgery and you're still
owing the vet some money. So these are things that
you've already attained. You already have the car, you already received
the student loan, and it is currently as of the day you're doing
your balance sheet, how much is left owing?
5. Section 1 - Basic Details: Okay, so now getting started on the actual example of a
personal balance sheet, we're gonna look at the
first section to begin with. So at the very top,
you're going to put the name of the individual. Usually that's a
business, but because we're doing a personal
version of that, you just put the name
of the individual for who the balance
sheet is for. Secondly, just the title
personal balance sheet, so that can be
consistent for everyone. Then lastly, you're just
putting as of the date, either the date that you're
doing it or the date that you are calculating
those numbers for. So again, a personal
balance sheet is a snapshot of a single day. So with this example, you're just going to
put one date there. Here's another example
of what that might look like for the top section, using my name here, and then personal balance sheet, and then the date as
of November 1, 2022. So again, put your name, their personal balance sheet can stay the same for
just about everyone. And then the date, the date
that you're doing it or the date that you are
calculating the financials for.
6. Section 2 - Assets: Now that we've covered
the first section which includes the name, the title of the financial
statement, and the date. We can move on to
the second section, which actually looks at the
assets for the individual. So the assets were things
like house, car, and savings. So we're going to put those
on the left-hand side here. The descriptions of the items that can be a fairly long list. It can be a shortlist, just
depends on the individual. Then on the right side we
put the value of each asset. Underneath that, we put
total assets on the left. And then on the right here, we add up the total value
of each individual asset. Now just a quick example
of another asset section. So the top we have
assets written in bold and then just that list, itemized list of different
assets on the left, and then their current
market values on the right. Then don't forget your
final calculation there at the total
assets at the bottom. So you just take all the
asset items and their values and calculate the
total combination of all those values at
the bottom right here. To get your total assets.
7. Section 3 - Liabilities: Okay, so now we've
covered Section one, which is the top portion here, and then section two,
the second portion, which is looking at the
individual's assets. Now we're going to
look at section three, which is looking at
the liabilities. So the format for
the liabilities is the same as assets other than we're changing
the title here or the subtitle to liabilities. And then the same thing
on the left here, we have the item description, but these are the liabilities
rather than assets. So some examples of
liabilities would be mortgage, so that's not mortgage payments. That's the total amount
remaining on the mortgage. The mortgage principal. Student loan would
be another example. And then credit card debt
would be another example. On the left, the items, and
then again on the right, you have the current value
of those liabilities. Underneath that, just like
you did with total assets. Total liabilities on the left and then on the right
you want to add up all the individual
values of each liability. And then one more quick
example here that I have saved as a PDF for your
liability section. So liabilities at the
top itemized list of the different
liabilities on the left, on the right there values, individual values, and again, that's current market values. Bottom-left, you have total liabilities,
and bottom-right, you have the calculation for all these individual items
added up for a grand total.
8. Net Worth Explained: Okay. So now that we have
our top portion filled out, we have our assets filled out, and we have our
liabilities filled out. We have all the information we need to do the final section, which is the calculation
of the net worth. And the net worth is ultimately just what something is worth. The way that we were business, the way that we figure
out that calculation is simply looking at the difference between assets and liabilities. So here we have the total
value of all our assets, and here we have the total
value of all our liabilities. Now in order to
calculate net worth, all we do is take
the total assets and from that subtract the
total liabilities. So in this case, this
individualist $454,000 worth of assets and they have $413,825
worth of liabilities. So if you subtract the
total liabilities from the total value of assets
leftover with $40,175. So this individual has a positive net worth
of just over $40,000. And that is because
the total value of assets is greater than the total value of
the liabilities. If the reverse where true, where their total
liabilities had a greater volume than their assets than they would
have a negative net worth. Okay, one more example here. Once you're done
your total assets and you have the total value, and you're done with your
list of total liabilities. Now the total value, then you can calculate the net
worth at the bottom here. So write net worth on the left. And then on the
bottom right, you're just doing the calculation. The calculation is just taking the total value of
all the assets. And from that you're subtracting the total value of
all the liabilities. So in this case, you have
total assets of $493,000. And from that you're subtracting $382,000 for liabilities. And what's leftover is $111,000
of positive net worth.
9. Additional Instructions: There are just a
few final details that I would like to go over before we do an example
together on a spreadsheet. So when filling out the
personal balance sheet, a few things to be aware of, that it is a snapshot
of one specific date. So when I talked
about the mortgage, you're not looking at how
much you're having to pay on a monthly basis or what
the original mortgage was, looking at, the amount
outstanding for that particular date that you are making your balance sheet. Secondly, you want to
look at market values, not purchase prices. For the example,
using a vehicle. Let's say if you
bought a vehicle for $20,000.03 years ago, it's probably not
worth $20,000 anymore. So you don't want to put the
original purchase price. You want to put the price
that it's worth today. Same thing with the house. If you bought a
house for $500,000, and that was ten years ago, It's most likely
most likely worth more today than it was
when you purchased it. And therefore, you
should be putting the market value, not
the purchase price. Then lastly, don't
bother including assets and liabilities
with very little value. You might have a lot
of different assets. Like you might have
some shoes and some clothes and
things like that. But what is the
current resale value if they're only worth $20, $30, $40, it's not
really worth including. You can decide for yourself
what that threshold is. Maybe it's $500, maybe it's
1,000, maybe it's 5,000. But I wouldn't bother putting
the little things that are under 100,000 or under
$100, under $200. Just a little bit more
information on that subject. So things not to
include would be shoes, unless of course you have
some really expensive shoes that you could
resell for a $1,000. You could occlude,
include those, but otherwise, I
wouldn't bother. Same thing with the clothes
if the clothing item, item that you could
sell for 50, 60, $70, probably not worth it
if it's 500,000 to one $100. Maybe I have a really expensive wedding dress that
you could resell. In that case, you
might want to include it food for your groceries and non-perishable food items you have at home. I
wouldn't include those. And then any other personal
items with low values. So again, you get to decide for yourself where
that threshold is. Is it $500, is $1,000. It's up to you, but I would
say if it's under 100, $200 for sure, don't
bother counting it. One last important
bit of information here is just looking
at revolving credit. What is revolving credit? That's an account
that allows you to payback and withdrawal or
spend money repeatedly. So think of like a credit card or line of credit where
it's not a onetime loan. You're given that credit, you can spend it,
you can pay it back. You can spend it
again, you can pay it back over the course
of many years. It's staying open. It's revolving. It's
a revolving door. The kids can come and go. When you're inputting that
into your balance sheet, it's important to
do that correctly. And by doing that correctly,
what you need to do is only include what you're actually
doing as liability, not the total value
of credit available. So as an example there, let's say I have a MasterCard and the total credit available, available to me as $10,000. But I've spent $2,500. I don't have to put $10,000 is a liability because
I'm not owing $10,000. I'm only actually
owing the $2,500. So that's all that goes on my balance sheet as a
liability in that case.
10. Inputting Basic Details: Okay, now for the main event, let's do a balance
sheet together. So right now I'm in Google
Spreadsheets, Google Sheets. You can do this just
so you're aware, you can do this on paper. You can do it on a Google Doc. You can do at Microsoft
Word however you want. I just like to do
it on a spreadsheet just because there's
calculations involved in the way that it
organizes the information. So for starters, let's
give the document a title. Let's call that Bruce
personal balance sheet. Next up, we want to give
it the title information, so we will add my name. Next is the title
of the document, so personal balance
sheet and then the date. So we will say as of
November 1, 202021. Other thing I'd like to do
here is remove the grid lines. So I go to View and then show
grid lines, so that's gone. Now, one thing we can do here
is just center of these. Okay, so that's
the first section. Now, make sure that you've
added your name and set a mine or for whoever the
balance sheet is for, you can keep this personal
balance sheet as the title. And then for the date, that's the date that you're
actually creating the document or when you're actually looking
at the financials.
11. Inputting Assets: Next up is the asset section. So I can start here
by writing assets. I'll put that in
capital letters. Then below that
you want to start listing some of the assets. So maybe you have a house, a car, boat, savings account. Maybe you have a GIC. Now you just want to add the
total values there. So these are market, current market value is not what you originally paid for it. So let's say the house currently the market value is $450,000. You add the price there
on the right side. The car, maybe you could
sell it for 12,000. The boat maybe that's $16,000. Savings account. Maybe you have $5,000 in there. The GIC, maybe you
have $10,000 in there. For some people,
this there could be a really long list of
assets for other people. It's just gonna be a few things. Remember, you don't have to
put small things like shoes and clothes and things like that that aren't
worth very much. So after you have
your assets there, at the bottom, you can put, I'll do it in capital
letters again, total assets. Then on the right here you
wanna do the calculation. So with Google Sheets you
just go equals and then some. And then you want to highlight all of these ones that
you want to calculate. Close the brackets
and hit Enter. So now you have the total
value of the assets.
12. Inputting Liabilities: Now that we're done
our asset section here we can move on to
liability section. So the same thing here. We want to write liabilities, capital letters, then over here and start
writing our items. So for starters, maybe
we have a mortgage. After that, maybe
we have a car loan, maybe a student loan, and maybe credit card debt. Now over on the right side, you want to enter the
values for each of those. And remember it it's not
the original amount of the mortgage is the current
outstanding as of today? Let's say there's $350,000 currently on the
mortgage remaining. The car loan, maybe $10,000. Student loan, say $20,000, and credit card
debt, maybe $2,000. So after that underneath we
can write total liabilities. And over here we do
the calculation. So just equals and then
some open the brackets, highlight the totals
you want to calculate. Close the brackets
and hit Enter. So now you have your
total liabilities, the value of that, you can bold it here, and that's it for the
liabilities section. Again, some people might have quite a few more liabilities, some people might have fewer. It depends on you.
13. Calculating Net Worth: Now that we have our personal information
and titles there, we have our asset section
with all our assets and the values with total
asset calculation. Then we have our
liability section with all our liabilities and values and our total
calculation for liabilities. We can finish it off with our net worth calculation there at the bottom on the left, net worth, and
then shift over to the right here and
do our calculation. And for this we
just want to equals total assets minus
total liabilities. Hit Enter, and we
get our value there. I'm gonna make it bold. So because we had
$493,000 worth of assets and $392 worth
of liabilities. The difference there
is a positive $111. If the reverse where true, where where assets had
a lower value than liabilities than we would
have a negative net worth. But in this case, this amount is $111,000 greater
than this amount. So we have a positive
$111,000 in net worth.
14. Formatting The Balance Sheet: Last thing here is a
little bit of formatting. This is totally optional. You don't have to do
if you don't want to. I just like formatting things
to make them look nice. So for starters, I will draw a border around the spreadsheet. Whoops, too far. There we go. Up here border. And I'm going to make it a
little bit thicker line. Make that black, and then
thicknesses right here. Okay, Next we can kinda
highlight our asset section. Put a border around that, and then do the same
for liabilities. If we want to, we can
add some color in here, maybe a light blue,
the Sanford here. And then net worth can put
a border around there too. You can slide this column
over a little bit. Make them, I meant to
make this one smaller. Okay? If you want, you can bold
this. So you can experiment. There's a bunch of
different things you can do to make this look nicer. Can make this row a
little bit smaller. You can highlight total liabilities and in
different ways too. So it's up to you. This is all, like I said, this
is just optional. I just like to make my
spreadsheets look nice. You can make it a
little bit thinner here to whatever you want. It depends if it's just for
you, maybe it doesn't matter. But even for myself, when I keep
spreadsheets like this, I just like to make
them look a little bit more fancy or whatever.
15. Reviewing The Balance Sheet: Okay, so there we go. We have our name,
we have the title, we have the date. As of date. We have our asset section
with all our assets and their values and then the total valuable assets down here. We have our liabilities
section with all the items there and
all their current values. And then the total calculation
for total liabilities. And then we have the total
calculation of total assets minus total our total
liabilities and net worth. That's it for the spreadsheet. And again, you may have
a lot more than this. You may have a lot
fewer than that. Just depends on you, but
hopefully this gives you a good idea as to how to make
your own on a spreadsheet, or even if you want to
write this down on paper, a Google Doc or
Microsoft Word file, that is fine as well. Lastly, just to review, what
is a finished balance sheet, tell us if your liabilities
are greater than your assets, you have a negative net worth. And if your assets are greater
than your liabilities, you have a positive net worth.
16. Class Project: Okay, so that concludes the instructional
portion of the class. Now onto the class project, which of course is making
your own balance sheet. And you can do that in a
variation of different ways. You can write that on paper. You can do it in a Word file, you can do it in a spreadsheet, but I think it's best
if you save it for submission either as a PDF
file or as a picture file. And as I mentioned
before in the class, It's really important that
you're not submitting personal insensitive
financial information. So what I would recommend is if you're going to submit it, just use a hypothetical
situation or, or a fictional
character just for practice or some
fictional numbers. Or take your personal
balance sheet and just change the
numbers a little bit so it's not displaying
any of your personal numbers, especially if you are going
to be sharing it publicly so that others in the class
can give feedback on it. We don't want anyone's private information being
shared publicly. And so on. Making your balance
sheet just follow the steps I gave in class. Step one, the details at the top step to
the asset section, step three, liabilities section. And then at the
bottom, section number four would be calculating
the net worth. And again, you can do that in different files,
different styles. You can have an itemized
list in different orders. It's not that strict
with how you do it. It's more so just happening
with proper format, with the proper type of
information in there.
17. Conclusion: So that concludes the class. I hope that you
found that useful. I hope the instructions
were good, and I hope that you can
implement that and they come and balance sheet and you can
do it regularly as well. I actually make one for
myself and I do a screenshot every month just
so I can look back on where I was at financially. So this is a really
useful tool just for gaining a better
understanding of your personal
financial situation, for setting goals, even for tracking your goals and
your progress over time. So I also have another
video on my channel. You can check that
out and it's going over personal income statement, which is similar, but as
I covered in this class, It's going over your income coming in and money going out, as opposed to taking
a picture for a given day of your
assets and liabilities. You can also check me out on
Instagram at magnify this. That's MAG NAL to us. Thank you.
Josh Buchanan, Business Consultant
