Our assets (or pillars of wealth) and liabilities (or debts) may be tracked using a statement of net worth, which is also known as a balance sheet. A typical personal balance sheet consists of two columns (see Figure 2). The left column lists assets, which may include a home, a car, some stock and bond investments, etc. The right column lists liabilities, which may include car loans, home mortgages, credit card balances, student debt, etc. The left side of the balance sheet reflects what we own while the right side shows what we owe. Subtracting total liabilities from total assets yields personal or household net worth or net wealth. Net worth is effectively the value of our nest egg at any point in time.
On the balance sheet we usually make a distinction between long-term assets and liabilities and short-term (or current) assets and liabilities. Short-term refers to items that mature or come due within one year, while long-term items come due or mature beyond one year in the future.
A sample balance sheet may be found at PillarsOfWealth.com.
Figure 2: Personal Balance Sheet for: Dr. John Q. Public
On December 31, 20XX