Those with business and professional experience know that they cannot manage their companies effectively without understanding their financial situation. Similarly, when it comes to building a comprehensive wealth plan, they need a framework to assess their overall financial situation.
“Balance of life” provides a complete overview of the owner’s assets, liabilities and net worth. Although similar to the more traditional balance sheet used to track companies, the Life Balance Sheet combines both real and intended assets and liabilities.
The left side of the sheet lists the owner’s assets and includes traditional financial assets (cash, stocks, bonds, alternative assets, etc.) and other tangible assets (real estate, precious metals, art collections, etc.). intended, but expected assets.
Hidden assets are often non-liquid assets that are not commercially available but have no value. In a previous article, it was called “Human Capital.” Although human capital is often overlooked, it represents the present value of the owner’s expected return.
Commitments on the right side of the sheet should be considered in the same manner. Mortgages, business loans and other secured loans are open liabilities. In addition, job and internship owners must include inheritance targets as a guaranteed obligation, and they will include the estimated cost of career professionals and non-owner scholarships.
For example, if you want to maintain a certain standard of living after you leave your job or career, you create a guaranteed debt that must be financed by the assets on the left side of your Life Balance. The desire to buy a vacation home, start another business, or fulfill a charitable commitment also represents a intended obligation.
Think of a balance sheet showing assets on the left and liabilities on the right. The combined property includes a home, retirement plans and family business. Together, they are worth $ 2,000,000. To this we will add the $ 800,000 that the owner expects to earn as income from work. This represents a total asset value of $ 2,800,000 /.
Under liabilities, we will list three common assets, including mortgages, college expenses, and scholarship expenses. That’s a total of $ 1,800,000. That leaves $ 1,000,000 as personal wealth; an amount that a person can use as they wish, but it will have an impact on their net worth, retirement and even their inheritance.
The use of the Life Balance Sheet helps owners, professionals and others to set a value (current value) for the intended assets (projected earnings) as well as the intended liabilities (pensions and other expenses). This information should lead owners to consider all their tangible and intangible assets (including the value of their work) to make sure they are on track to achieve their long-term goals.
 Wilcox, Jarrod, Jeffrey E. Horvitz and Dan diBartolomeo, 2006. Investment management for taxable private investors, Charlottsville, VA: CFA Institute Research Foundation.