Taking Inventory of Your Assets
The first step in the process of determining what assets and liabilities you now have is to create an organized list of them.
Rest assured, we won't be asking you to do the type of detailed, whole-house inventory that you might do in connection with your homeowner's or renter's insurance policy, or a list of your financial obligations that might satisfy your banker. We're not really interested in the serial number on that electric can opener, or the $25 that you still owe your brother!
Your financial planning asset inventory will list the major assets that you have, their value, and what income (if any) they generate. While personal effects such as clothes, electrical appliances and furniture will be listed — or at least lumped together and reflected under a "personal effects" entry — the emphasis of such a list is on your investments, that is, assets that you hold with a view to their likely appreciation in value (such as real estate or collectible coins or stamps) and/or generation of income (such as stocks, bonds, CDs, or rental real estate).
Listing your assets. Because you'll use the information derived from your asset inventory to analyze and possibly realign your investment strategies, you'll want the entries for your investments to be fairly detailed. You'll generally want to include an entry recording when each investment was made, its purchase price, its estimated current market value, and the amount of yearly income that it earns (if any). If you are married, you should also note whether each asset is owned by you alone, or jointly with your spouse. If you like, you can also list assets owned solely by your spouse to get a more complete picture of your family's financial situation.
Here is an example of a portion of a simplified asset inventory:
| (1) |
(2) |
(3) |
(4) |
(5) |
(6) |
| Asset |
Date acquired/
Price per unit |
Market value now (per unit) |
Units bought |
Total value (col. 3 x 4) |
Yearly
income from asset |
| Personal effects |
various |
various |
__ |
$15,000 |
none |
| Twin Lakes Power 9% 40-yr bonds |
1-3-89/$925 |
$1,260 |
5 |
$6300 |
$450 |
| Econo-Eat common stock |
4-24-95/$24 |
$13 |
100 |
$1,300 |
$10 |
| Coin collection |
about $750 over
several years |
$2,600 |
__ |
$2,600 |
none |
| Life insurance: $100,000 whole life policy |
12-28-83/$900/yr premium |
__ |
1 |
$5,000
(cash value) |
none |
Listing your liabilities. Your list of liabilities should include a brief description of each liability, including:
- whom you owe the debt to
- when you incurred the debt
- the interest rate you must pay on the debt
- the amount of the unpaid balance of the debt
- the amount you repay each month (or whatever repayment period)
- if the debt is secured, list the security (such as your house or your car)
- the date when you expect to have paid off the debt
After you have completed the inventory of your assets, the next step in constructing your financial plan is to come up with a current personal budget of income and expenses.
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