Things You Should Know About Your Personal Balance Sheet

There are 3 tools that folks can use to manage their personal finances. They are a personal life plan, a personal budget and a personal balance sheet. When these tools are identified to folks most acknowledge a life plan but do not really have one. Most know and try to have a budget…sort of. However, an amazing number of people have no idea what a balance sheet is. So here are the basic things you should know about a balance sheet.

Why should I have a balance sheet?

A balance sheet is where you keep track of how much you own and how much you owe and the difference between the two. You take the value of your assets (what you own) and subtract the value of your debts (what you owe) to get your net worth. You should know what your net worth is at any given time. It is also important to know the value and structure of your assets and liabilities.

Your net worth should be a positive number. The older you are the bigger the number should be. That is because you will need this net worth to finance your retirement when you can no longer work to provide income to your budget. The assets in your balance sheet fund your retirement in three ways. They keep costs down. The best example of this is home ownership. If you own your own home you will not have to pay a mortgage payment. That means you need 30% less to live on each month. The second way that assets fund your retirement is that you invest them in income producing assets such as Certificates of Deposit, Bonds or dividend producing stocks. A third way is that you can sell off assets at a gradual pace to fund your budgetary needs as you age. A reverse mortgage is a good example of this.

Assets and Liabilities

You need to know what an asset is and what a liability is. You also need to know that there are different kinds of assets and different kinds of liabilities.

An asset is an item of value that you own. It has a market value that is the amount that you can sell it for. The value is what the item would sell for if you had to sell it in the short term which may be days or months depending on the asset. When valuing your assets you must consider this and be honest about exactly how much your asset would sell for in the short term. The total value is written down as the asset on your balance sheet. There may be an offsetting liability. For a house it would be the mortgage or any other debt secured against the home. For a car it would be a car loan. The difference between the value of the house or car and what is owed is the equity in that particular investment. This is like a net worth for that particular asset.

There are appreciating assets and depreciating assets. A home is generally an appreciating asset over the long term. In recent times we have learned that in the short term a home can lose its value rather quickly. However, most housing markets recover in the long term and a home should appreciate over time. A car is almost always a depreciating asset. That means that as it ages it becomes worth less each year. Appreciating assets are more balance sheet friendly than depreciating assets.

Assets that can have a lien put on there are the only ones that banks or other lending institutions will consider as valid as asset entries on a balance sheet. Things like furnishings and jewelry are not considered assets for use in getting a secured loan. Items such as the unused part of a line of credit or credit card limit are not assets on any form of balance sheet.

Liabilities are what you owe. Any form of debt is a liability. There are many forms of debt. There is secured debt. That means that the debt is secured by a lien against an asset that you own. The lien and the debt should be for less than the resale value of the asset. Unsecured debt does not have any such lien and is hopefully based on your capacity to service the debt. The problem with unsecured debt like credit cards is that it is not offset by some asset that you own and acts only to reduce the net worth on your balance sheet.

Credit card debt would thus be categorized as bad debt as it only acts as a drag on building positive net worth. A mortgage where you pay the principal down a little each month as the property is increasing in value is good debt. That is because you add to your net worth in two ways; first you pay off the debt and the second way is that the asset that secures the mortgage (your home) increases in value while you pay off the mortgage. Both deliver increased value to your net worth.

Balance sheet goals

There is only one goal that you need to focus on for your balance sheet. You need to own more than you owe. The normal pattern is that the older you get the larger your net worth becomes. There are two basic dynamics that contribute to this trend. One is the miracle of compound interest. The longer that assets are allowed to compound in savings and investment products, the larger the annual contribution is to your personal net worth. This is particularly true for the second basic dynamic. The largest portion of most people’s net worth is the ownership of their home. As you pay down your mortgage, the later payments pay a higher percentage against the principal and less on interest. It is a form of reverse compounding. You pay less interest. In addition the compounded increases of property values are very high when you put them in perspective of what you may have paid for your home 20 or 30 years earlier. Some years they may go up as much as you paid for the house when you bought it.


For the average person this article is a good start on what you need to know about a personal balance sheet. As you work with your personal balance sheet you will learn more and more about financial products and how to use them to increase your net worth. Your net worth is the ultimate bottom line. If a financial product does not deliver positive results to your net worth then you should look for another product

How Can I Buy a Car With Bad Credit?

According to an article in consumers affairs;

In general, it is better to go with a bank or an auto financing lender rather than the car dealership down the street that is offering a “buy here, pay here” deal. If you do wind up with a high interest rate on your car, work on rebuilding your credit score so that you can eventually refinance.

If you suddenly find yourself without a car you might be asking, “How can I buy a car with bad credit?”, well, You DON’T! I know not having a ride can be a problem, like how do you get to work, or what if you want to go out? Well as far as getting to work goes, see if a work colleague lives near you and chip in on some gas for a ride. As far as getting out from time to time, there’s always Uber.

You want to give yourself a few months to save up some money and pay cash for a vehicle until you can get your credit to a point where you can get a 6% or less interest rate. Your choice of vehicle will be better and the total cost for the vehicle will be a lot less.

Another problem with buying a car with bad credit that most people forget is car insurance. Your insurance premiums unfortunately are also based on your credit score. The combined monthly cost of your car and insurance could be challenging. Again, waiting until you have a good credit score will save you on insurance as well.

Here is an example based on $35,000.00 vehicle purchase at 20% versus 6% on a 5-year loan.

$35,000.00 at 20% interest you will pay over $15,000.00 in interest at 6% you will pay approximately $5,000.00 in interest. Quite a difference.

Your total cost for the vehicle is about $15,000.00 less in interest at 6%, and your monthly payment is approximately $250.00 less per month!

OK let’s play a little game, what if you took that $250.00 per month that you’re NOT paying in interest and invested it each month over the same 5-year time period with a 6% return?

Well you end up EARNING $3000.00 instead of PAYING $15000.00. I’d say that’s a pretty good argument for doing everything you can to avoid a high interest car loan.

Instead, put ALL your resources into getting your credit fixed. This will put you in to position to buy at a good interest rate with minimum money down. This will save you a ton of money and you won’t regret it!

Buy a new car or even a used car is never a good investment, but one you can’t avoid. Buy a car with bad credit, as you can see, is yet a worse scenario. Make sure you do whatever it takes to avoid this costly mistake.

If you considering purchasing a car in the near future and have some credit challenges be sure to check with one of our Credit Experts to see how you can improve your credit for the best interest rates and no money down options.

Why Have a Personal Balance Sheet and How Do You Use It?

Why should you, the individual, have a personal balance sheet? Isn’t that something that mainly businesses use? The truth is that it is something that you need and you’re about to see why.

First of all, we are living in a time in which global economics are not doing that great. The entire world economy is in the process of collapsing in on us. Eventually, that is going to trickle down to us and cause us to have to tighten how we spend our money. This is one reason why a personal balance sheet is important.

A personal balance sheet should possess your assets and your liabilities. This means that you need to list all of your personal accounts that have debit balances and all of your personal accounts having credit balances. When you place your assets on one side of the personal balance sheet and liabilities on the other side, your assets should be equal to your liabilities.

You will also find that your assets are classified. These classifications include:

• Fixed assets – This includes land, your house, and other properties owned by you

• Fictitious assets – Those assets that are not represented by anything concrete. Sometimes these are called “invisible assets”

• Floating assets – Those assets that can undergo change such as cash and stocks

• Fixed liabilities – Those liabilities that are redeemed after a long period, such as long-term loans

• Current liabilities – These can be redeemed in the near future, such as bank loans and utility bills

• Contingent liabilities – These are items that have the potential of becoming a liability

In managing your finances, you want to make sure that everything balances out. If it doesn’t balance out, then you know you need to make some changes. If your liabilities exceed your assets, then you need to pay down your liabilities. Be careful with your assets, though, because you could be taxed on certain assets. So if you have an asset that you don’t need, you better check your tax laws or you’re going to find yourself adding a new liability to your personal balance sheet.

So if you haven’t already, create yourself a personal balance sheet and see how it works out for you. You may find that you’ll realize things about your finances that you never knew. It puts everything into a brand new perspective so that you can better manage your current finances and your financial future.

Personal Loan and Its Different Advantages

A personal loan is an unsecured loan which is offered to a consumer for catering their various personal needs such as the renovation of a house, marriage, home appliances, buy vehicle amid others. This is offered after verifying one’s ability of paying especially the income source and also according to their credit history. A nominal processing fee will be charged and the sum as per a person’s paying ability will get credited to their account. In fact the loan payment is made via fixed installments which also includes interest and for fixed time periods. The icing on the cake is these days personal loans are a smart choice as one do not require going through a lot of formalities and tedious paperwork. Most of the financial institutions and banks offer personal loans today and the rate of interest is also quite reasonable.

Discover the different benefits

• Available easily- to get a personal loan is no longer a challenging affair. It is offered by almost all financial institutions and banks at a reasonable rate of interest. Compared to other loans it is convenient and easy to get

• No middleman or agent involved- for availing a personal loan one will not require taking the help of an agent or a middleman. This will avoid unnecessary expenses and delays. A person can approach the financial institution or bank for the purpose directly

• Unsecured loan- this is indeed an unsecured loan. Here no collateral security is needed for availing the loan. In fact, all that is needed is one’s ability of paying back the money.

• Less processing time- because it is accessible devoid of any guarantee or security the processing time needed to get this is naturally less compared to other loans

• All purpose loans- in this form of loan it is not compulsory for a person in specifying the reason for which they will be using the money.

• Minimum paperwork- to get a loan will not need any asset verification or other forms of certificates and proofs which include ample paperwork as none of one’s property is mortgaged

• Offers and schemes- different financial institutions and banks keep announcing offers and special schemes on personal loans, especially for the professionals such as architects, doctors, chartered accountants and the like

• Amount and tenure- these loans generally are provided varying from Rs 15000 to Rs 20 lakhs differing from one bank to another. The repayment can be made through EMIs

The bottom line is, rather than borrowing money from a credit card it is always better to choose a personal loan as the rate of interest is comparatively lower. So reap its utmost benefits.

Applying for a Personal Loan With Subpar Credit – What to Know

Anyone that finds themselves with multiple balances on credit cards that have high interest may consider looking for a personal loan with bad credit. This allows them to transfer those balances and take advantage of a lower interest rate to pay off their cards. Sadly, many banks will turn them down due to their credit. Thankfully, there are ways to get a loan that will help them save money, even with that low credit score.

Whether due to financial issues, job loss, or just striving to build a good credit score as a first time user it is difficult to get a loan. The way credit reports work is always changing and there are many factors that affect a person’s credit. It’s important to stay in the know about how to build it, and what your options are. There are likely more options than they think. Here are some ways to apply for and get a personal loan with bad credit.

How to Get a Loan with Bad Credit

Having zero credit or poor credit is a major issue when looking to secure a loan, because that person is viewed as a high risk customer who may default. It’s important to accept that until the credit score is raised, one won’t be able to enjoy the standard lending guidelines offered by big banks.

For anyone that’s been turned down for a loan or who doesn’t want to pay monstrous rates, here are some options:

Consider a Home Equity Line of Credit

If there is enough equity in owned property, it’s possible to secure a tax-deductible, low-interest loan or line of credit that can be used in any way. The only downfall is that many don’t want to tap into their home equity as it puts the property in jeopardy if they can’t repay it. However, with a steady income and a bit of discipline then this can be paid off and is a less pricey option no matter what the credit score!

Try and Apply to Credit Unions

Credit unions are so much better than a regular bank. That’s because they are member-owned. Usually they are founded by people who have something in common whether it be living in the same area, or working in the same profession. They are nonprofit and have a sole purpose of helping members. They offer great customer service and low fees.

Borrow from a Friend

Consider what’s called P2P or peer-to-peer lending. There are even sites online that let a person borrow from someone directly rather than a bank. This form of lending is getting very popular and is quite simple. It’s a winning situation for both investors who want to earn interest and borrowers who enjoy paying lower rates. It’s the perfect solution when looking to apply for a personal loan with bad credit. Current rates with P2P lending are as low as 6%. That’s far lower than most credit cards.

Family Loans

If an online peer doesn’t pick up a loan request, there’s always a chance a family member might. However, it’s more than important to treat a loan from someone in the family just as a professional loan. It should be documented and recorded. A written agreement should show the interest rate, terms of repayment and collateral that’s going against the loan. It should also lay out all the actions to be taken if the borrower does not repay.

What About a Co-signer?

If one is searching for a personal loan with bad credit and they don’t have a family member or a friend that is available to offer the loan, maybe they would consider co-signing. This is when someone who trusts that the borrower can repay the debt would take a chance on them and be a back up to repay the loan should that person default.

Bad Credit Auto Loan: A Way to Repair Your Credit Score

Having a car has become a necessity in today’s fast growing world. But to obtain a car you need a good credit score. What do you do when you know that it is not as good as it should be and you find yourself in a tight spot financially? The first thought that comes to your mind is whether you will qualify for an auto loan. And, why would a lender approve loan application of an individual who has a spotty credit score? But the good news is that you can get a bad credit auto loan.

What is a Bad Credit Auto Loan?

The simplest definition is that you can get money for buying a car with a bad credit score. A credit score depends on your ‘creditworthiness’. So when you have a bad credit score, getting an auto loan becomes difficult because a lender thinks that you are unable to repay your debts. Today, owing to online services many lenders offer attractive interest rates on a bad credit auto loan providing the borrower a sigh of relief!

It’s no Picnic!

Getting an approval for a bad credit auto loan is no picnic. It means that when your credit score is not in your favor, it becomes difficult to get approval. But, with the following guidelines, approval becomes easy:

· When your credit score is in question, don’t assume that it must be bad. The wise way is to check it yourself.

· It is the best time to shop around for a bad credit auto loan. Many lenders see borrowers with credit issues in a positive light. So it is important to shop around in order to make the right decision.

· Go online! Various loan options are available online which not only suits your needs but also offer you best interest rates.

· Consider a co-signer. A co-signer provides the security which lenders are looking for in a loan application. Your co-signer’s financial condition should be good in order to compensate for your low score.

Different Lenders have Different Viewpoints

Something that is multifaceted can be looked at from many points of view, with each point of view showing something new.

· You don’t have to worry about your credit score since the lenders are not going to looking at it. Instead, the lenders will look at how likely you will pay off the loan in future.

· The approval rate for a bad credit auto loan is higher than other conventional loans.

· It gives you an opportunity to improve your reputation. If you make timely payments, it can provide you with a chance to build a stronger financial standing.

On the approval of a bad credit auto loan, you will now have the money to buy a new car. You will have fixed interest rate and monthly payments. So now when you make the payments on time, it will not only repair your credit score but also build a good reputation with the lender.

When your credit score is not good, Online bad credit auto financing is the perfect way to buy a car. Apply with EZ Auto Finance and the online loan expert will help you to become a proud owner of your favorite car. Also, it will enable you to obtain no down payment auto loans.

Your Personal Balance Sheet And Budget

You have two personal finance tools at your disposal for improving cash flow and stabilizing the balance sheet. First you have to know how to make a budget and then prepare a personal balance sheet. It is really quite simple. You can draw them out, print them off or download an Excel spreadsheet and fill them in. Personally I like the intimacy of taking out pen and paper and drawing out quickie table for cash flow and net worth. The budget is a 6 X 6 table for each pay period and the spreadsheet is a 6 X 4 table. The budget table has the income items on the left side and the spending items on the right side. Take the total and subtract the right side from the left side and hopefully you have a positive number which means you earn more than you spend. For your net worth spreadsheet, you add up your assets on the left side and subtract the total liabilities on the right side. Hopefully you are familiar with these concepts. If not read on and you may come to understand why you should know if you have positive or negative cash flow and net worth.

Because we have 2 tools and they are either positive of negative, we have four scenarios. First is a very happy one where both are positive. Your income exceeds your spending and your assets exceed your liabilities. This means you are doing something very right. Keep it up because as long as you have positive cash flow, you should be able to save without incurring a liability to do so.

The biggest danger to this happy scenario would be the irresponsible use of debt. The nature of this would be to use credit card debt to buy consumer items without paying off the credit card within weeks or months. Car leases are bad as well as they add debt with no offsetting asset. Any long term consumer loan is dangerous and you are being bombarded every day with advertising trying to talk you into bad debt. The advertising aims at the room in your budget. An item may cost hundreds or thousands of dollars but it only costs you $29 or $69 per month. Some even don’t require you to pay till next year. These deals do two really bad things to your personal finances. They reduce or obliterate your budget surplus for each month. On the balance sheet, they add only debt as consumer items are not considered assets by any financial institution. These deals move you closer to negative cash flow and a negative balance sheet. Remember the idea is to have a positive cash flow and a positive and growing balance sheet surplus.

If you have been caught in this trap you can be in one of two situations that require that you take action. First is that you still have positive cash flow but you have now more liabilities than you have assets. So it is simple you just do not spend any more until you have paid off those debt. To speed it up you can improve your income and/or reduce your spending on day to day items. Make this concept part of your decision making process when you choose to take on consumer debt in the future. The simplest way to say it is for you to always have a plan for how you will pay off your consumer debt before you take on any more. Definitely have a limit both in total dollar value and cash draw per month. In the second scenario, you spend more than you make (negative cash flow) but you do have a surplus on your balance sheet. This negative cash flow must be resolved in the short term. If your cash flow remains in the negative over time, the only way to keep going is to deficit finance and that is borrow. That means you are increasing your liabilities. The argument in the past has been, “That’s okay because the assets are increasing in value as well.” As is becoming crystal clear, this is not a safe and sustainable situation. If the assets drop in value you are quickly into the final scenario where both your cash flow and balance sheet are negative.

This scenario has nothing but stress to add to your life. The courses of action are the good, the bad and the ugly. The GOOD is if things turn around and your assets regain their value. You get your false sense of security back or you learn that it is time to pay off debts and save some money. The BAD is that things don’t turn around but you can hang on. You borrow here to pay there and do these tap dances for years until you get some breaks. This is not uncommon and a lot of folks have done it especially during the years when raising kids. You just hope that you don’t hit the wall and lose your income because then you have to deal with the ugly. Even UGLY isn’t as bad as it was. Bankruptcy is now viewed as new start. It is still hard on the ego and has some restrictions going forward but it is often less stressful than digging out of a mountain of debt. You will also get coaching and hopefully develop the skills to keep both your budget and your balance sheet positive.