Five Basic Accounts
1. Assets: things you own 2. Liabilities: things you owe 3. Equity: overall net worth 4. Income: increases value 5. Expenses: decreases value
Assets - Liabilities = Equity (aka Net Worth)
Things you own minus things you owe equals your net worth. Consider all financial actions in the light of increasing your net worth.
Assets - Liabilities = Equity + (Income - Expenses)
Cash/Checking Some Mutual Funds Other Mutual Funds/Stocks/Bonds Retirement Savings Car House Talent and goodwill *Accounts Receivable*
Capital Gains in here?
Accounts Payable Debt Taxes
The guiding light
Salary Bonus Gifts Interest & Dividends Other
Debt Service Physical Plant / Utilities Insurances
Variable / Discretionary:
Food Clothing Hobbies Donations
Resellable assets, such as stocks, bonds, houses, or cars, can change value over time. Some assets could increase in value, some could decrease in value. Capital gains are the profits from selling an asset.