How To Organize Your Entire Financial Life

FEBRUARY 18, 2016
Setu Mazumdar, MD, CFP
Personal Finance, Money, BudgetingSo you made your New Year’s resolutions last December, but I’ll wager you probably won’t follow through with many of them, especially the ones dealing with money. One reason may be that you just don’t know where to begin. The first step I recommend is to create your personal balance sheet, which is an inventory of everything you own and everything you owe.

Let’s see how this works:

Assets (Everything You Own)

I usually like to break this down into three categories:

Cash assets: This includes everything from checking accounts, savings accounts, money market accounts, emergency fund, and equivalents such as bank CDs for short term goals Investment and retirement assets (includes all of your investment accounts for you and your spouse such as: 401(k), profit sharing, 403(b), 457, traditional IRAs, Roth IRAs, defined benefit plans, pension plans, taxable brokerage accounts, partnership interests, and illiquid investments) 

Business interests: Includes ownership interests in medical practices and other ventures

Tangible assets: Home (primary residence), cars, rental homes, land, and any other major assets

You’ll have to list the market value of all of those assets and also notate other important items such as percent ownership and interest rates.

Debt (Everything You Owe)

Separate this into two categories:

Short Term Debt: This includes credit card balances (though you can exclude this if you pay them off every month. If you don’t, shame on you!) and any loans you will pay off within one year.

Long Term Debt: This includes student loans, mortgages, business loans, and any other debt you think you’ll pay off more than one year from now
Just like the list of assets, document the balances and other important items such as interest rates, terms of the debt, original loan balances.

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