Like a company, each of us have a personal balance sheet. A balance sheet captures a snapshot of our financial status at one particular point of time. There are 3 primary items in a personal balance sheet, that is Assets, Liabilities and Net Worth.
Consolidating and tracking all your accounts, different assets and loans can be rather time consuming. Dr Wealth allows you to keep track of all your assets and liabilities as well as calculate your net worth.
All the resources you'll ever need as an investor
We've gone ahead and done the work. Compiled here are all the resources you'll need as an investor.
Assets are basically resources which are owned by you for your benefit. They can be grouped into Cash & Cash Equivalents, Investment Assets and Personal Use Assets.
Dr Wealth Balance Sheet
Cash & Cash Equivalents
Cash & Cash Equivalents are basically your bank savings and checking accounts, as well as fixed deposit accounts and cash value of insurance policies. These are your most liquid assets which can be used any time. However, they have the lowest returns of all assets and therefore should be kept to a minimum. To figure out the optimal amount of cash you should keep, see How Big Should Your Emergency Fund Be?
Dr Wealth allows you to key in individual bank accounts as well as insurance policies so it will be easy to keep track of your cash accounts.
Investment Assets are the core assets which will be primarily used to build your wealth. They are capable of generating investment returns in terms of income and capital gains. Investment Assets consists of your retirement assets (CPF and SRS) and other investments such as stocks, bonds, properties and alternative assets. To learn the difference between the asset classes, see Understanding Investment Asset Classes. To learn more about alternative assets, see Understanding Investments in Alternative Assets.
Dr Wealth allows you to view your overall portfolio allocation at a glance as well as keep track of individual stocks which you own. This is especially useful if you have multiple brokerage accounts and will be able to consolidate your positions here.
Personal Use Assets
Personal use assets are assets which are mainly for own use. They include your house, car, medisave etc. While your home may also appreciate in value, you are unlikely to be able to realize the value unless you sell it.
Liabilities are loans which are owed to banks and other creditors. They include debt such as credit card debt, personal loans, housing loans and car loans.
Dr Wealth allows you to key in loan accounts individually and track the monthly repayments, loan balance as well as interest rate.
Net worth measures your wealth level and it is calculated by deducting total liabilities from total assets. Once you have key in all your asset and liabilities, Dr Wealth automatically calculates your net worth as shown below. Net worth is one of the most important numbers you should know, see What is your net worth and why you should know it
While positive net worth is good, it is more important to have growth in net worth. Growth in net worth over time is also a good measure of financial progress. It is recommended to measure your net worth at least twice yearly.
Next, we look at Creating Your Income Statement With Dr Wealth
About the Author
Calvin Yeo is the Managing Director of Doctor Wealth Pte Ltd (www.drwealth.com), which is an online financial planning platform. He is also a Chartered Financial Analyst (CFA) as well as Certified Financial Planner (CFP).
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