One of the simplest ways to determine your personal financial position is to create a personal balance sheet. A balance sheet is a type of financial statement. A personal balance sheet lists a person’s assets and liabilities. It then shows the person’s net worth; which is found by subtracting the liabilities form the assets.

To begin a personal balance sheet, gather all of your bills and bank statements. You will begin by taking a blank sheet of paper and dating it. Place a title under the date, and call it “Personal Balance Sheet.” Many people create a balance sheet every month, usually on the last day of the month. Label the first line “Assets.”

Begin the balance sheet by listing every asset you have. An asset is anything that has value. For a personal balance sheet, list all cash you have in banks and all balances in various accounts, including mutual funds, stocks and retirement accounts. After you list the asset name, list its value. Include your home, at current market value, cars, boats and collections that you own. After you have listed all assets, add up the values and place the amount below the list. Label it “Total Assets.”

Next, list all of your liabilities under a category labeled “Liabilities.” A liability is anything you owe. This includes the balance of your mortgage, car loans, student loans, personal loans and credit card debt. Do not include monthly bills, such as utilities or gas. After listing each item and its amount, add up the totals. Place the total amount next to the words “Total Liabilities.”

Finally, subtract the total liability amount from the total asset amount. List this amount at the bottom of your balance sheet and label it “Net Worth.”

A person’s net worth value tells a lot. If you have to liquidate, meaning sell all of your assets and pay all debts, the net worth is the value you would be left with. By creating a personal balance sheet each month, you will be able to determine if your financial position is becoming better or worse.