A Primer for Understanding Your Money, Part 2

As you learn to invest, shore up your personal balance sheet in a move of stewardship.

September is the last month of the third quarter of the year and beginning the first week in October, companies will provide what are called earnings reports. These reports tell you how the company is doing and can help you decide whether  to continue to invest, purchase more stocks or bonds or sell. Last week we discussed that at the end of each quarter (December, March, June and September), public companies who trade stocks on the U. S. Stock Market,  provide what is referred to as earnings reports. These come in the form of a balance sheet, profit and loss, statement of cash flows, disclosures, and management’s discussion.

You need to know and understand them at a basic level when determining whether you want to invest or change your 401-K, 403-B or other retirement investment plans. Today we look at the Balance Sheet.

Balance Sheet

The balance sheet tells you the company’s financial position at a particular point in time. It does not measure the company’s performance over a particular period . For example,  the balance sheet tells you the company’s position on December 31, 2021. And not from January through December of 2021.

The balance sheet is has three basic parts:  assets, liabilities, and equity. Consider further that these also contain subsections such as current and non-current, or long-term assets, and liabilities. But since I promise to keep it fun and relatable, we are not going there!


A simple way to think about it is to know that assets are things of value the company owns which generally are of value or increase in value. For the company you are thinking about investing in, or the stock you own, assets include:

  • cash balances or money in the bank
  • stocks or bonds they invested in
  • building or land they possess,
  • and, perhaps their equipment.

Some of these assets retain or increase in value over time and others decrease in value over time . You want to consider for example the kind of assets the company has, and are they the type that are appreciating or depreciating? 

This exposes the real reason I decided to write this series. Just like the companies in which your retirement plan is invested have a balance sheet asset section, you do too. The problem for most people is that when it comes to the asset section of their personal finances, they either do not have enough assets, or the assets they have do not increase in value.

Real Value

For example, if your assets include mostly fancy or expensive vehicles, you know that those vehicles do not increase in value, and therefore do not contribute to a strong balance sheet. If your assets live in your closet, as in your clothing, know that they do not appreciate in value, either. So, perhaps, you need to change your personal asset allocation. The take away here is that you need to acquire more assets which appreciate, like real estate or something of value for your personal balance sheet and stop, or reduce investing in depreciating assets.

I mentioned that assets are subdivided into current and non current assets. Current assets are the ones the company can quickly liquidate or turn into cash within the next six months to one year to pay for emergencies. Sounds complicated? Here’s how it’s relatable to you. In your personal balance sheet assets section, you to have a current asset section. Those are the things you can easily convert into cash in case of an emergency. For example,  they could be a certificate of deposit (CD), stocks or other investment. When the pandemic began and people were strapped for money, they cashed in their CD’s to make the mortgage payments, or their car notes until other emergency resources became available.

Now you can look at the current assets section of the company in which you are reviewing their earning report with greater awareness and wisdom. You should also take this opportunity to look at the current asset section of your personal financial statement. What are the things you can liquidate quickly in an emergency? Do those current assets have value and do they appreciate?


Think about liabilities as debt or bills that the company owes to third parties. For a company, bills come in the form of bonds payable, interest, or loans. In your personal financial statement liabilities section you find your car note, mortgage, and student loans. Like assets, liabilities include current and non-current or long term liabilities.  Your personal current liabilities can be credit cards, or the short term monthly portion of your mortgage payments due for the next 12 months.  So, as with your company’s  evaluation, give consideration to the idea that should the company have to pay off some liabilities within six months, could it do so? One formula to help you figure this out is current ratio. That means, simply calculate by dividing the current assets by the current liabilities.

How liquid are you personally? That is, how much are you able to pay off of your current liabilities after converting your current liabilities into cash? That’s why acquiring or investing in assets that appreciate are important. Leave the air Jordans alone and purchase Nike stock if you must “just do it”!


This section can be complicated, but it simply comes down to value or worth. What is the company valued or what are you in your personal balance sheet worth? From a business viewpoint you take all the company’s assets ( current and non current) and take away all its liabilities ( current and non-current ) and that gives you the equity or worth. The equity section includes any profits or losses the company made over a certain period.

Is the company’s value increasing? Does it have lots of pending litigation? Is the stock price increasing? In you personal financial statement equity section, think through all your assets like home, cars, etc., and then subtract the mortgage debt, car note, student loan, and then, see what you are worth.

Don’t get discouraged if it does not look good, because as I stated in the beginning of this article, your balance sheet is your financial position as of a specific date. Your personal balance sheet can change one year from now, or next month! This week, write out your personal balance sheet listing assets, liabilities and your equity section. Are you in the red or are you in the black? What are you going to did about it?


Let’s talk Bitcoin as legal tender. Last week El Salvador became the first country in the world to designate Bitcoin as a form of legal tender. Before you think about, and jump into this as an investment opportunity, know that there are complications. The country lacks the business, legal structure, and human infrastructure to handle the change. About half of the population lacks internet, many lack a mobile device, according to Reuters. Many people, especially the poor, lack access to get paid, or pay others. For this reason the World Bank and, or, IMF has not supported this move. Of added concern is the IRS will be watching with great interest for the implications of money laundering, fraud and other financial crimes. Watch this space as it can have implications on the volatility of cryptocurrency in the marketplace and your investment. And that’s what’s up!


Ruthven R. Phillip, Esq., is a tax attorney, Stewardship and Philanthropy Ministry Assistant, and CEO of Give2Getrich, LLC . Give2Get Rich, LLC 2021. All Rights Reserved. Any distribution or reproduction of part or all of the contents in any form is prohibited.


More from Ruthven Phillip

New Retail Investors

The stock market reached a record high last week and has grown...
Read More

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.