Personal balance sheet is your 'report card' on finances

Compiling a personal balance sheet that defines your assets and liabilities to determine your net worth is an important financial exercise. It offers these benefits:

1. Estate planning depends heavily on the size of your estate. Unless you know how much you're worth, you can't adequately prepare for estate-tax liabilities. Developing a net worth statement is equally important for singles and couples.

2. Most people do not know how much they're worth. When a definitive net worth statement is finished, most are suprised at the total.

3. Compiling a personal balance sheet is a vital aid in determining whether you are gaining or losing financially. Most couples show a steadily rising net worth due to inflation and the increasing equity value of their house and other property. A balance- sheet calculation that shows a decrease could be a warning signal. a specific event could be responsible -- a casualty loss, a big medical bill, or children's college expenses.

Your net worth or "how much you're worth" is the bottom line result when you prepare a personal balance sheet. When total liabilities are subtracted from your total assets, the answer is your net worth. One hopes the answer will be a positive one. If your liabilities exceed your assets -- and this could happen -- you could be well along on the road to personal bankruptcy.

To develop your personal balance sheet, list all of your assets and their current net value. Your house, for example, can be set down on the asset side at the current market value less all seling expenses (real estate agency commission, transfer taxes, if any, finance points, prepayment penalty, etc.). On the liabilities side note the current loan principal outstanding. The difference is your equity and is part of your net worth.

Continue down the list of all your assets -- stocks, bonds, real estate, cash in bank, savings account, and personal property. If you own cash value life insurance policies, note only the cash value plus any accumulated dividends -- not their face value. Personal property evaluation requires some judgment. You can determine fairly closely how much your cars are worth. Boats, recreational equipment, jewelry and antiques, collections, and similar specialties can be listed at their market value. Household furnishings and clothing valuations are less definite because their use value is likely to be higher than their value in the used marketplace. Use your best judgment on these, but be consistent.

Liabilities are usually easier to determine. In addition to your home loan principal, list outstanding balances on bank and other credit cards, notes you owe, and similar debts. Include outstanding balances owed on furniture, car, and other personal property contracts.

When compiling a personal balance sheet, you're looking for a snapshot of your financial position. Don't include any income or spending figures. You're looking for a picture of how you stand financially as of a specific date -- April 15 or July 1, for example. One year of six months later, you can take another snapshot of your financial position to determine whether you have gained or lost. A continuing series of net worth statements becomes your financial report card.

Using a prepared form will help you remember all of the elements to be included. Ask your local bank for a printed balance sheet statement; banks usually require one as a prelude for getting a loan. Or, you may get a one-sheet personal balance sheet blank worksheet by sending a self- addressed, stamped, long (No. 10) envelop e to Moneywise, Box 102, Mercer Island, Wash. 98040