MR MONEY MAKER: How to build a long-term savings portfolio Part 2


Bring on the balance sheet and find out what you’re really worth: Part 2 of MR MONEY MAKER’s guide to building a long-term savings portfolio










Why a Balance Sheet?

Every company has to have a balance sheet to establish what the business owns, how much it owes, and how much it is worth. 

It is a simple snapshot of what the finances look like. So we should do the same and establish what your family is worth.

Take stock: A balance sheet provides a simple snapshot of what a company or individual's finances look like. So we should all make one to establish what we and our families are worth

Take stock: A balance sheet provides a simple snapshot of what a company or individual’s finances look like. So we should all make one to establish what we and our families are worth

What to include?

We should all have a ‘family’ balance sheet, even if as a singleton that means a family of one. 

We should include all of those with whom we have some financial responsibility.

That means that you could include parents or grandparents – assuming, that is, you are all on speaking terms at least. 

So now you need to be truthful to yourself as to what you own and owe, or in accountancy terms, your assets and liabilities. 

For many of us, probably the largest items will be the property on the plus side and the mortgage on the other. 

Then you can start to include your other chattels, but now is the time to be ruthless in your valuation.

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Your car, for example, will most likely not be worth what you bought it for. Other precious items like paintings, furniture and jewellery should be included.

Additionally, do not forget your pensions and ISAs. Although you may not wish to touch them yet, they are still your assets. 

When it comes to the debts and liabilities, you must include the longer-term ones such as car loans and so on, but not necessarily any credit cards, as hopefully they are cleared each month. If not, then give yourself a slap on the wrist and add them in.

So what can I learn from this?

Hopefully the exercise is not that gloomy – it could even be quite encouraging. The netted-off difference of the two columns of assets and liabilities can give you a boost if it is more than you thought. 

This is especially so if you can include other family members, especially grandparents.

So what should you do?

Once down on paper the nasties tend to stand out, such as the short-term loans and cards. You should prioritise dealing with them as necessary. 

Then you have the assets. This is the key element, as although it may seem a positive number, what you need to know is how much larger will it have to become to cover your future income, health and care needs. 

Here, I would suggest you seek out a financial planner. They will take your numbers and throw them forward to see what you will be needing to cover those responsibilities. 

So you will need your ‘number’ – the target value of assets that you are going to need in the future.

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How long is my time horizon?

As long as you can make it. I like to plan across the generations, so much so that newborns are included – it’s never too soon to save for a pension! 

Older members can plan their later years and also pass on part of their own assets as they wish.

So how do I get to my ‘number’?

This is the next stage where we build an investment plan and a portfolio to achieve our aims. Next week I will show you where you can start.



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