Tag Archives: personal balance sheet

Mar 28 2026

NET WORTH: A DIFFERENT APPROACH

In basic terms, net worth, the difference between a person’s assets (what they own, items of value) and liabilities (amounts owed), is viewed on a person’s personal balance sheet. Assets in the amount of $196,000 minus liabilities of $63,000 results in a net worth of $133,000. However, the amount of net worth may not truly reflect financial security.

When viewing net worth, remember, not all assets have the same financial benefit:

  • Productive wealth involves assets that are actively working for you generating income, dividends, interest and capital gains. These include savings accounts, retirement accounts, investment accounts, and rental property.
  • Sellable wealth includes assets with a market value that you could and would sell under certain circumstances. While these assets are not generating income, the value would be available if you needed the money.
  • Estate wealth includes assets with paper value but that you either can’t or are unwilling to sell. These include your primary home, car, business ownership, and sentimental assets such as family heirlooms and antique collectibles. Home equity and other estate items will usually not be viewed as available wealth.

While home equity and business ownership increase net worth, these have limited usable wealth due to illiquidity. When planning finances, emphasize productive or sellable assets for usable wealth; don’t just seek a larger net worth.

For additional information on net worth, go to:

https://clark.com/personal-finance-credit/a-better-way-to-think-about-your-net-worth/

Teaching Suggestions

  • Have students create a proposed future balance sheet that emphasizes productive and sellable wealth.
  • Have students use AI research to obtain suggestions for increasing a person’s productive and sellable wealth.

Discussion Questions 

  1. Why might a person overlook the value of productive and sellable wealth over estate wealth?
  2. Describe actions a person might take to emphasize productive and sellable wealth.   
Jun 17 2015

Personal Finance Stress Test

To avoid financial disaster, several measurements are available for assessing a person’s personal financial stress:

  1.  The Debt-to-Income Ratio is obtained by dividing your debts by pretax earnings.  Generally this number should be less than 28 percent, without your mortgage, or 36 percent, including your mortgage payment.
  2.  Discretionary Expenses involve spending for items other than fixed obligations and variable nondiscretionary items, such as food and utilities. Purely discretionary expenses may involve recreation and vacations.  An analysis of these categories will allow you to delay, reduce, or eliminate various expenses to avoid financial difficulties.
  3. Emergency Savings should be able to cover three to nine months of living expenses. These funds should be readily available in savings or other easily liquidated accounts. Greater financial greater obligations will require a larger emergency fund.
  1. Additional Income involving wages or tips from a part-time job or selling personal possessions can provide a cushion in times of financial difficulty.
  1. Total Assets, both liquid and non-liquid, will reduce your vulnerability to financial turmoil.

For additional information on the personal finance stress test, click here.

Teaching Suggestions

  • Have students calculate one or more of these measurements for their life situation.
  • Have students prepare a short creative video with a summary of these measurements.

Discussion Questions 

  1. Why is liquidity important for reduced financial stress?
  2. What actions would you recommend to for a person to reduce their personal financial stress?
May 30 2015

Household Wealth

The net worth of U.S. households grew to over $80 trillion at the end of 2014. This change was almost a two percent increase over the previous year.  The increase was mainly the result of higher stock prices.  Also, increased home values added to the new wealth. This increased wealth is expected to result in expanded consumer spending for improved economic activity.

For additional information on household wealth, click here.

Teaching Suggestions

  • Have students talk to several people about the types of assets held by their household.
  • Have students prepare a personal balance sheet that reflects their personal wealth.

Discussion Questions 

  1. What types of economic activity can result in higher personal wealth in a society?
  2. What personal financial decisions affect personal wealth?
  3. What are benefits and potential concerns of a higher personal wealth?