Huntington Insights | Ask the Expert | Fall 2017

Your personal balance sheet

Why it’s important to track your personal assets and liabilities

Personal balance sheets don’t get nearly the focus—or any at all—that household budgets do, but they’re just as important, especially now. Here’s why.

What is a personal balance sheet, and what is its purpose?

The goal of a personal balance sheet is to help you grow your assets while managing your liabilities—and even reducing their cost. Creating one forces you to answer two key questions that many people don’t think about: “What are the assets I own? And what are the liabilities I hold?” It seems simple, but keeping track of your assets and liabilities is a key way to help you improve your net worth as you move through life. Your objective is to ensure your assets are rising faster over time than your liabilities, because higher net worth often leads to a higher quality of life.

Unfortunately, many families don’t take the time to put together a personal balance sheet. As a result, they miss opportunities for a better credit score on current financing, financial peace-of-mind or a brighter retirement.

What types of accounts or investments make up a personal balance sheet?

The asset side of one’s balance sheet starts with any direct business holdings or family business. Understanding the valuation and operation is important to both you and your spouse or partner. Next is real estate holdings, which may be in the form of a household, land or other investment interests. The interplay between valuations, liabilities and cash flow is of paramount interest to one’s personal balance sheet.

Last is financial assets. For most Americans, this starts with cash in checking or savings accounts and works through to investment and retirement accounts. The key here is understand what you own and why you own it, and then how they complement other business or real estate holdings.

The liability side of one’s personal balance sheet consists of loans, accounts payable that last from month-to-month, and perhaps debts of other family members (though this will be unique to each family circumstance).

How is a business balance sheet different from a personal balance sheet?

Business owners will have a few components around accounts receivable that won’t be included in a personal balance sheet. There also may be some staging of assets and depreciation of assets on a business balance sheet.

From our experience working with business owners, we’ve found that they are focused on the business. That is a good thing, but it means they often neglect their personal balance sheets. It’s critical to prioritize both.

Banks like Huntington will work with individuals on both sides of the balance sheet at the same time, whether it’s through an investment group or lending group. We welcome all our commercial and small-business customers to join the Private Bank.

How often should people review their personal balance sheet, and what does the review look like?

At a minimum, it must be an annual exercise. Begin with a meeting at home. Perform an inventory of your personal assets and liabilities. How do they fit together? How does the household understand them? Evaluate whether they are doing the job the household wants them to do. Then, consult a third party for an outside opinion, such as a private banker, accountant or trusted financial advisor.

What is the best way to track these documents and accounts?

You can download a basic balance sheet off the internet, either from your provider or from your private banker. Keep tabs on it during the year, and track additions and deletions proactively. To start tracking your personal investment portfolio today, download Huntington’s Checklist for Life.

How might the market impact personal balance sheets this year?

This is an incredible time where both sides of a personal balance sheet are working for households. Asset values are rising almost across the board, whether it’s real estate, real assets or stocks, and interest rates are staying low. We want to make sure our customers are taking advantage.


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John Augustine

Our Expert

John Augustine, CFA Chief Investment Officer Huntington Bank
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