Me Ltd.
by andrew@JijiniMarkets - Mon 05 Feb 2007
This is something I should have done years ago: start viewing myself as a company. So this week I've been working on producing a personal balance sheet and a cash-flow statement.
To start with, I have drawn up a balance sheet in which I have listed my assets (savings, stocks, car, etc.) and liabilities. In listing my assets I've had to resist the urge to include "irrelevant" assets such as books, bed sheets, DVD collection, etc. as they don't really count when calculating one's net worth. Also, I could have included loans to friends as assets but I'm trying to be honest with myself. For my current assets I've included my short-term stocks and any cash I have. The list of my liabilities is, as expected, significantly longer than that of my assets and is almost entirely made up of current liabilities: credit card debts and all other pending bills. From my assets and liabilities I've been able to determine my net worth (or equity), my debt/equity ratio and, more interestingly, my current ratio (my ability to meet my current liabilities with my current assets without liquidating my long-term assets such as my car). It doesn't look good! However, this is primarily due to some current (hopefully one-off) restructuring in my life that requires some heavy financing - marriage!
Next I've worked on my monthly cash-flow statement, tabulating where my money is coming from and more importantly where it is going. Again for this, one side is much longer than the other and no prizes for guessing which. My salary is my main inflow while my outflows are bills, bills and more bills. Surprisingly, my net cash-flow is still positive which means I have extra cash at the end of each month which I can save, re-invest (as I have done in stocks so far) or use to cover my current liabilities.
'Why are you doing this?' You ask. I plan to be wealthy -- very wealthy -- and in my head I have a definition of what that means. However, to get there, I first have to know where I currently stand and have a method of keeping track of how far I am in achieving that goal. No serious CEO runs a company without a balance sheet and, as CEO of Me Ltd., I don't intend to be the exception.
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