Quarterly update - 2014 Q2

As investor, I think it is very important to understand your own (or your family's if/when applicable) personal balance sheet, thereby laying the ground to understand your risk exposure and consequently how that might affect your investment strategy. I therefore regularly track our balance sheet position (in the more traditional 'accounting' style of setting up a balance sheet).

Below in three figures is a summary per quarter during the last ten years of the assets and liabilities in our household (the currency is SEK in all figures). It is showing the overall picture of our balance sheet position, and it is the one I use to regularly track our position and judge our risk exposure. The summary is not 100% accurate as it does not include all assets and deferred tax liabilities in our household. For several reasons (mainly simplicity, confidentiality and difficulty of valuing correctly) I have not included them. The net equity effect today, however, is in my most conservative estimate 0 SEK, i.e. these assets and deferred tax liabilities have a zero or positive effect on our equity. Assets not included are e.g. 6-month 'cash emergency fund', all other inventory (such as computers, TV-sets, gaming consoles, furniture etc which is popular to sell in the TV-show 'Lyxfällan'), shares in non-listed companies and savings designated to our children.

I am starting by showing the asset side of the balance sheet. It is compromised by four main elements, starting with the most illiquid asset type first
A) property
B) inventory
C) financial assets
D) cash and short-term interest bearing funds

Figure 1. Shows asset side with most illiquid assets below and most liquid assets on top.

Figure 2. Shows asset side again, now with most liquid assets at the bottom. I only include the cash and financial assets when calculating HNWI status.

Figure 3. Shows liabilities side, with debt at the bottom, deferred tax in the middle and equity at the top. The line shows the equity ratio.

I will add comments and reflections in the next post.