By balancing your assets and liabilities, you can determine your personal net worth. Knowing your net worth allows you to see where you stand from a financial viewpoint. A balance sheet clearly displays of your assets and liabilities. It can be used to prioritize spending and may even be required when applying for a loan or loan modification. Generally, your assets should be greater than your liabilities.

Step 1. Gather all necessary financial documents, such as bills and bank statements. Anything you owe money on is considered a liability. For example, if you have a mortgage, the home is not considered an asset until it is paid off and you retain the deed. However, equity in the home may qualify as an asset.

Step 2. Create your balance sheet by dividing a piece of paper in half. Designate the left side column "assets" and label the right side "liabilities."

Step 3. List each asset. Assets include all cash, bank accounts, annuities, retirement accounts, stocks, and bonds. Anything you can easily covert to cash is classified as an asset. If you own vehicles, list them as assets. Only use the current market value of the assets. If you are owed money by a friend or client, it can also be included as an asset.

Step 4. List all liabilities in the left column. Liabilities are anything that can be defined as a debt or loss. For instance, a mortgage is considered a liability. Once the mortgage loan is paid in full, it becomes an asset. Credit card, insurance and auto debt are other possible liabilities. List anything you are required to still pay, such as money owed to a friend.

Step 5. Do not list any income. Your income will not be considered any income unless it is deposited in a bank account.

Step 6. Add all the assets. Include the total at the bottom of the column. Next, add all your liabilities together including the sum at the bottom of the right column.

Step 7. Subtract the total number of liabilities from the total of the assets. The goal is to have a positive number. Do not be alarmed if the number is negative. Use the information in your balance sheet to help you determine where you need to cut back or reduce. You may also want to create a budget to help you prioritize your spending.