New Year “Reality Check” – What’s on your balance sheet?

You’re one month into 2017 now.  Way to go!  How are you doing?  Do you know?

There’s an old saying that “you get what you measure.”  Dan Ariely, in an article from the The Harvard Business Review, is even more emphatic:

“It can’t be that simple, you might argue— but psychologists and economists will tell you it is. Human beings adjust behavior based on the metrics they’re held against. Anything you measure will impel a person to optimize his score on that metric.  What you measure is what you’ll get. Period.”

That’s a pretty powerful claim.  So, how can you put that power to work as a positive source of change in your personal financial life?

If you said, “by following a budget,” you get a gold star and a nod from me!  (There will most likely be a budgeting column for you in the near future.)  But today I’m going to encourage you to consider a different measurement: your household balance sheet.

A balance sheet is a snapshot of your financial health at a given point in time.  As such, it is most useful if it is completed on a consistent basis (i.e., annually).  Every January, my husband and I update the household balance sheet.  At first this felt like “busywork” – collecting data for the sake of collecting data, like a teacher assigning math problems on a rainy day – but over time it’s been marvelous.  And in fact, over time, it’s changed our lives.  I believe this exercise can do the same for you.


First: it provides you with a tool to stay financially healthy.  It won’t do the work for you, but it will help.  Think of the balance sheet as the “kale” of the spreadsheet family (or whatever vegetable is the “miracle food” of the moment.)  It is packed with data that helps your brain digest the effects of your daily behavior over time.

After you enter all your data (listing your assets and your liabilities), take a step back and observe:

Have your debts decreased?  Have your assets increased?

Overall, is your net worth moving in the right direction?  Is your bottom line number getting bigger each year?  If not, what can you do to turn it around?

Entering your annual balances helps you to identify trends.  You can spot problems before they become serious.  Then you can work on a plan to change them, and work towards the future you actually want.

Next, and perhaps not as obvious: the balance sheet activity helps to fight emotions of negativity, like guilt after holiday spending, or general worry about what the future may hold.  Plain physical numbers can be surprisingly reassuring.  Most of us prefer to have a sense of control.  But you can’t establish control if you don’t know what you’re dealing with.  The balance sheet is one way to achieve control.

Finally, completing this exercise is also reassuring because it lays out your financial picture in black and white for anyone to see – not just you.  I’m not suggesting that you post your balance sheet on social media!  I am suggesting that you may share it with a spouse, child, and/or your executor, to empower them.  Should something happen to you where you became unable to manage your finances yourself, someone else is going to need the tools to get the job done.  Having your accounts written down in one place is incredibly helpful for anyone who does not live inside your brain.

Just like keeping track of your physical health should help to keep you aware of what’s going on in your body, keeping track of your financial health should help to keep you aware of what’s going on with your money.  The power of measurement may seem like an abstract concept, but once you start putting it to use in your life, you may be surprised by how effective it can be. 

Give it a shot!  I know you can do it.

Happy New Year,