Reference

Building your personal balance sheet from scratch.

A robust net-worth figure starts with a robust list. The list is short, the categories are simple, and the rules for what to include are surprisingly restrictive.

The two columns

A personal balance sheet has two columns: assets and liabilities. The balance is “equity” in corporate finance and “net worth” for households. Same arithmetic, different terminology.

Most household construction errors come from one of three sources: including assets that should not be there, valuing assets too generously, or omitting liabilities entirely.

Categorising assets

Six categories cover the realistic asset universe for most households:

Cash and bank deposits. Chequing, savings, term deposits, money-market funds. Anything redeemable for cash within one business day at face value.
Investments (taxable). Brokerage account holdings: ETFs, individual equities, bonds. Mark to current market value; do not adjust for capital-gains tax (that's a future cash-flow consideration, not a balance-sheet adjustment).
Retirement / superannuation. Tax-advantaged accounts: super funds, 401(k), IRA, SIPP. List the current portfolio value — for super, the figure on your most recent quarterly statement.
Real estate. Owner-occupied home and any investment properties at current market value, less estimated transaction costs (5 % in Australia covering agent commission, marketing, and legal).
Vehicles. At private-sale value, not retail. Glass's Guide / Kelley Blue Book private-party figure for cars older than three years; conservative recent-sale comparable for newer vehicles.
Other assets. Crypto holdings at current market value, valuable instruments, collectibles with a real resale market, equity in private businesses (rough estimate).

The exclusion rule

The single most common construction mistake is including human capital (your future earning power), home contents below approximately AUD 5,000 each (clothing, furniture, kitchenware), and assets you have no intention to sell (engagement rings, family heirlooms). All three are technically “assets” but their inclusion inflates net worth in ways that don't change the financial position you can actually deploy. Exclude.

Categorising liabilities

Five categories cover most household liabilities:

Mortgage balance. Current outstanding balance per most recent lender statement — not the original loan amount.
Student loans. Australian HECS/HELP, US federal and private student loans, UK student loans. Current balance.
Credit cards. Current statement balance, not credit limit. If you pay in full each month, the figure is your current month's spending; if you carry a balance, it's the carried portion.
Other consumer loans. Car loans, personal loans, BNPL active accounts, family loans formally documented.
Other liabilities. Tax liabilities (current year unpaid), legal settlements payable, deferred-payment obligations.

The valuation rule: realisable, not aspirational

An asset's balance-sheet value is what you could actually convert it to cash for. A house at last appraisal minus 5 % transaction costs. A car at private-party Glass's Guide value, not retail dealer markup. A brokerage portfolio at current market price, not what it cost you to buy.

This is conservative. It is supposed to be. The point of a balance sheet is to know what you actually have.

The first balance sheet vs. the hundredth

Your first balance sheet will take 60–90 minutes. You will discover accounts you forgot you had, balances different from what you assumed, and at least one asset value that was wrong by 20 %. This is normal and is the reason the exercise has value: it forces enumeration.

Your tenth balance sheet will take 15 minutes. By then you have a list and you are just refreshing balances. The marginal value drops sharply, but the trajectory information — net worth this quarter vs. last quarter — becomes the dominant insight.