Every company you admire closes its books on a schedule. Your family, which matters more to you than any company, probably has never closed its books once. Most households run entirely on cash flow feel: money came in,...
Every company you admire closes its books on a schedule. Your family, which matters more to you than any company, probably has never closed its books once. Most households run entirely on cash flow feel: money came in, money went out, the month survived. Nobody can say whether the family is worth more than it was a year ago.
A net worth statement fixes that in one evening. The formula is the oldest one in finance: everything you own minus everything you owe. What makes the family version powerful is not the arithmetic. It is the honesty rules you apply to each line, and the discipline of repeating it every quarter so a trend line appears.
Set aside two and a half hours on a quiet evening. Phone calculator, one notebook or spreadsheet, and your account statements. Here is the session.
The single failure mode of family balance sheets is flattery. People record the price they hope for, the price a broker once mentioned, the price the land "should" fetch. An inflated balance sheet is worse than none, because it licenses spending the family cannot afford.
So each asset class gets an honesty rule:
| Asset | Honesty rule | |---|---| | Cash and bank accounts | Face value, today's balance | | Mobile money wallets | Today's balance, every line in the household | | SACCO shares and deposits | The figure on your latest statement, not "about" | | Unit trusts, shares, pension | Current statement value, not what you paid in | | Land and buildings | What it would actually fetch in a 90-day sale, after fees. If you would refuse an offer at that price, you are pricing a feeling, not an asset | | Family business | A conservative multiple: roughly 2x one year of profit the business earns without you working for free in it. If it only makes money when you personally show up, discount hard | | Livestock | Head count times the local market price this month, minus what it costs to get them to market | | Vehicles, equipment | Quick-sale value, not replacement cost | | Money owed TO you | Only debts you genuinely expect back. A loan to a relative who has gone quiet for two years is a gift, not an asset |
Write each line down with the date. Rounding is fine. Precision is not the point; consistency is.
Now the other column, and this one demands the same honesty in reverse. Most families undercount debt because some of it is informal or embarrassing:
If a debt is disputed, record it anyway with a note. The balance sheet is a private document; it can hold uncomfortable truths.
Total assets minus total liabilities equals family net worth. Write it at the top of the page with the date, like this:
` FAMILY NET WORTH STATEMENT Date: __
ASSETS LIABILITIES Cash + bank __ Bank loans __ Mobile money __ SACCO loans __ SACCO shares __ App loans __ Unit trusts __ Family debts __ Land (90-day) __ Arrears __ Business (2x) __ Other __ Livestock __ Owed to us __ TOTAL ASSETS __ TOTAL LIABILITIES __
NET WORTH = ASSETS - LIABILITIES = __ Change vs last quarter: __ `
Store a copy in the LegacyPot vault next to your scanned documents, so the statement survives the phone it was typed on.
The level matters less than the slope. A family worth 5 million growing 20 percent a year is on a better road than a family worth 50 million shrinking 10 percent a year, and the arithmetic is blunt about it: at those rates the first family passes the second in about eight years. One is compounding; the other is liquidating in slow motion, usually without knowing it, because nobody is measuring.
This is why the statement is quarterly. One reading tells you a level. Four readings tell you a direction. Twelve readings tell you the truth about how the family actually handles money, which no single lucky or unlucky quarter can hide.
Some families will finish Step 3 and find a minus sign. Treat it as a starting point, not a verdict. A negative net worth with a date on it is more valuable than an unknown one, because now every quarter becomes a scoreboard: debts shrinking, the gap closing, the crossing point visible in advance. Families have built estates from below zero. What no family survives is a decade of not looking.
Once the totals exist, three divisions tell you most of what a financial adviser would:
Track all three on the same page as the net worth figure. Trends, again, beat levels.
The first evening is the heavy lift. After that, pick four fixed dates, for example the first Sunday of January, April, July, and October, and update balances, not the whole structure. Recount nothing from scratch; adjust what moved. Read the three ratios, compare to last quarter, and ask one question as a couple or family: what is the one line we will move before the next statement?
That single question, asked four times a year over a real number, does more for a family's finances than any budgeting app.
Put one evening on the calendar in the next seven days, gather your statements, and produce your family's first net worth statement using the template above. Date it, file it in the vault, and diarize the next one for three months from now. You are one evening away from knowing your slope.