Landlord · Seattle, WA · Member since 2010 · 3k+ posts · 1k+ votes
How many of you are aware of your personal balance sheet? While, I don't worry about pennies, I do track my balance sheet.
A personal balance sheet is slightly different than a business balance sheet.
Major Elements
Assets - Liabilities = Net Worth
It can be easy to think of investing as just the assets we buy, there is much more to it than that. Assets are great, but if your debt is to high it really doesn't matter.
Bottom line, I want to know that my net worth is growing and that I'm counting real assets and fully recognizing any debts that I have.
I am one of those people who find a Balance Sheet to be exactly what it's initials are. 99% of assets are either over valued or under valued. While some assets, such as stocks and bonds, have a value that can be estimated closely, even their value changes second to second.
Mike, don't throw out the baby with the bath water...just because the originator decides not to be honest with themselves and over estimate what something is worth does not mean there is no value to a personal balance sheet.
You always have a choice. You can fool yourself into thinking your RE is worth so much more than it really is or you can give it a realistic value. Same goes for all your other assets and liabilities. Sure, for rental properties NOI is king but they are still an asset.
I think it really comes down to whether net worth (an honest one) is important to you or not.
Yeap...it is hard for me to separate my business life from my personal life. My personal finances determine whether or not I can sign for additional debt, feel comfortable raising equity, etc. The two are very much intertwined for us.
Everyone thinks about this stuff differently and everyone's situation is different though. I can see how people want to keep them separate.