Get To Know Your Balance Sheet

I stew sometimes in my own stress about money and finances. I grimace at the debt I’ve taken on to fuel a life of comfort when all I’m really doing is being lazy and impatient about waiting for my hard work to pay off. I spend loosely to buy my family’s love and attention when the truth is that I am not responsible for their happiness and their love and affection is not a condition for mine. I carry the heavy burden of being the primary breadwinner in our family and claim sometimes that work steals time away from my being able to achieve personal fulfillment and self-identity when the truth is that work (the application of my time, energy and mental power to tasks and goals that I am actually good at) is the very core of my identity and what makes me most happy.

Woe is me, I say. Woe is me. I volunteer to take on the perceived stress and burden of carrying the money load in our family so I can struggle in full view to those in my line of sight about how hard my life is. It doesn’t take much peeling of the onion to challenge these dumb assignations I’ve taken on.

Money is the easiest perceived hardship to peel back because I view money most of the time through a too-simple and painful lens (I have almost all the classes of debt available to the modern American consumer and as far as I can tell, all of my friends and acquaintances are much, much better off than me).

But, I earn a really good living. The fact that I use it all up as quickly as it comes in is a source of embarrassment to me, but it doesn’t change the fact that I earn well. Meaning, I have a chance to correct things. My situation is not hopelessly upside down. I just need to gain focus on what I want from my relationship to money, both in general and specifically to the money that flows through my hands in everyday life.

When I’m stressed, it’s because I’ve convinced myself that money is a negative thing, that it’s limited, that I am not worthy of it, that I have traded off tomorrow’s income to service debt to satisfy yesterday’s urges. I want money to be a positive thing in my life though. And when I examine that question deeply, I realize that money can just as easily be a means to a positive end as is it a whip and an anvil today. Money can be a way to gain peace of mind, security, and, above all, access to the kind of freedom I want for my daily life (the freedom to choose what I invest my time and energy into, time to serve others, time to pursue creativity, time to explore the amazing world we live in).

The beauty of a balance sheet

Luckily, as a person who runs a small business, I have been exposed to the accounting principles of profit and loss statements and balance sheets. Be re-focusing my personal finances using these business tools, I have been able to put an objective perspective on my personal finances.

The balance sheet is the most beautiful thing in all of accounting. Simply put, a balance sheet is a calculation of your net worth. It is the express value of everything you own, minus everything you own. It makes no regard to how well you manage money, no regard for how big of an earner you are, and no regard for how you look to the outside world. It doesn’t calculate how loved you are or how smart you are. All it does is issue you a score, a beautiful, objective score, that states what you are worth.

When I think about the complex and muddy mess I sometimes make of finances (when I lose perspective), a balance sheet can clear up the picture. Rather than focus on credit-card debts, loan balances, or anemic bank accounts, the balance sheet adds everything up to a neat sum that cannot lie to you. It can’t tell you things are good because you drive a BMW if you owe $50,000 on it and could only sell it $35,000. Conversely, it can’t tell you that you should be suicidal about your debts and obligations if you own a rental property outright and could liquidate to pay off the debt that is a psychological burden to you.

In my case, despite my best effort to wreck myself financially, I actually have a positive net worth. On paper, I could liquidate everything I own, wipe out every debt I have and have a bank balance I could live off for a while. It’s a small positive net worth (so nothing to worked up about), but it creates a new foundation for my relationship with money. It puts me on the good side with money. It sets me up to view my finances positively, like something I want to nurture, feed, and grow. It informs the decisions I make as money flows through me from my ability to earn a decent living to make my balance sheet (and my financial position) safer, more secure, and bigger.

Do yourself a favor. Write out a balance sheet. Google it if you need help, but do it. Know where you stand. So when you’re thinking about your financial position (positively or negatively), you’re using the truth and not some story about money and wealth and your right to it in the terrible and untruthful way you’ve been taught.

52 Days of Paleo, Day 35

I skipped breakfast today, substituting coffee sweetened with raw honey for a proper meal. I made up for it at lunch though with a plate full of scrambled eggs, bacon and sauteed onion, sweet potatoes, spinach, zucchini, and bell pepper. Dinner was leftover taco-seasoned ground turkey and refried beans in corn tortilla shells with shredded cheese, spinach, and Tapatillo sauce. I snuck in some peanut-butter flavored M&Ms and Whoppers as a snack while watching a movie with my wife in the evening. No exercise today (I am just about back from a nasty batch of either food poisoning or intestinal distress that knocked me on my ass for most of the week).

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  1. A balance sheet is like a snapshot—it represents one date in time. The numbers represent balances, and because balances change daily, a balance sheet only represents one point in time versus a range. There are three parts to a balance sheet—what you own (assets), what you owe (liabilities) and your net worth (equity).

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