Your Personal Balance Sheet: Building a Net Worth Statement
- Step 1: list assets at current value
- Step 2: list everything you owe
- Step 3: net worth, and the number that matters more
- Reading the statement
- Mistakes that inflate the number
- Keeping it consistent
- Where this fits
Your net worth is everything you own minus everything you owe, valued on a single date. It is a personal balance sheet. Built once a year, the same way each time, it tells you whether your finances are actually moving forward in a way that monthly income and expense tracking cannot.
The single figure is less useful than its parts. Two households with the same net worth can be in very different positions depending on how much of it is a house they live in and how much is money they could use.
Step 1: list assets at current value
Use what each asset is worth today, not what you paid. A household in its late thirties:
| Asset | Current value, ₹ lakh |
|---|---|
| Savings accounts | 1.2 |
| Fixed deposits | 3.0 |
| EPF balance | 6.5 |
| PPF balance | 4.0 |
| Mutual funds | 8.3 |
| Shares | 2.0 |
| Gold jewellery, at a conservative value | 3.0 |
| Home, estimated market value | 85.0 |
| Car | 4.0 |
| Total assets | 117.0 |
How to value the awkward ones:
- Investments: the latest statement value. For shares and funds, the market value on your chosen date.
- EPF and PPF: the balance in the latest passbook or statement.
- Home: a conservative estimate from recent sales of similar homes nearby, not the highest listing you have seen. Use the same method every year.
- Gold: what you would realistically receive, which for jewellery is below the market price of the gold content.
- Car: its resale value, which falls every year.
Leave out things with no realistic resale value, such as furniture and electronics, and the surrender value of insurance policies you would never surrender.
Step 2: list everything you owe
| Liability | Outstanding, ₹ lakh |
|---|---|
| Home loan | 52.0 |
| Car loan | 2.5 |
| Credit card balance | 0.4 |
| Total liabilities | 54.9 |
Use the principal outstanding from each lender’s latest statement, not the total of remaining EMIs, which includes future interest. Include credit card balances even if you pay them in full each month; on the valuation date, you owe them.
Step 3: net worth, and the number that matters more
Net worth = 117.0 − 54.9 = ₹62.1 lakh.
Now separate what you could actually use. The home is where the family lives; selling it would mean paying rent. The car is needed. Jewellery is rarely sold. Take those out, and subtract every loan except the home loan, which the home you have excluded would cover:
| ₹ lakh | |
|---|---|
| Financial assets: savings, FDs, EPF, PPF, funds, shares | 25.0 |
| Less car loan and card balance | (2.9) |
| Financial net worth | 22.1 |
Of ₹62 lakh of net worth, only about ₹22 lakh is money working towards retirement and other goals. The rest is mostly home equity. That is not a bad thing, but it changes the answer to “are we on track?” considerably.
Reading the statement
The trend is the point. One statement is a snapshot. Compare this year with last year, and split the change into money you saved and changes in value. If net worth rose ₹8 lakh but ₹6 lakh of that was a higher estimate for the house, the household saved far less than the headline suggests.
Watch the debt ratio. Liabilities as a share of assets: here 54.9 ÷ 117 = 47%. It should fall over time as loans are repaid. A ratio that rises year after year is an early warning.
Check liquidity. Savings and fixed deposits of ₹4.2 lakh are the money available at short notice. Compare them with your emergency fund target.
Look at concentration. Here, home equity dominates. For another household it may be one employer’s shares. Heavy concentration in one asset is a risk the single figure hides.
Mistakes that inflate the number
- Valuing the home at the price you hope for. An optimistic property estimate can add more to net worth in a year than all your saving. Be conservative, and never let a rise in this one estimate replace saving.
- Counting future income. Next year’s bonus, an expected inheritance or the maturity value of a policy years away are not assets today. Include a policy only at the value you could actually receive now.
- Ignoring money you owe informally. A loan from a relative, an advance from an employer or a balance owed to a builder is a liability even without an EMI.
- Using the gross value of EMI-based purchases. A phone bought on a no-cost EMI is not an asset worth its price, and the remaining instalments are a liability.
Keeping it consistent
- Pick one date each year, such as 31 March, and always use it.
- Use the same valuation method for property and gold every year.
- Keep the spreadsheet or document, with the source of each figure noted, so next year takes half an hour.
- Include both partners’ assets and loans if finances are shared, and note which belong to whom.
Where this fits
- Build yours quickly: net worth calculator
- The company version of the same statement: how to read a balance sheet
- What to do with the debt side: which loan to prepay first
- Whether the financial part is enough: how many years to financial independence · retirement calculator