A balance sheet provides you with a snapshot of your financial health. It is a picture of all your assets, all your debt obligations, and your net worth. Your Net Worth is your assets minus your debts. Your balance sheet reflects how you have managed your financial resources. It shows the assets you have accumulated and the amount of debt you have taken on as you acquired these assets.
A balance sheet also helps you see how you are progressing toward the achievement of your financial goals.
Your net worth is the amount of resources you will have to draw on during retirement. Unless you want to live on your Social Security benefit, you will need other supplemental sources of income - a employer retirement plan or personal savings and investments.
Use the Balance Sheet Worksheet (PDF) to prepare your personal balance sheet. When determining a value for your assets, use conservative but realistic valuations. Overstating your assets or understating your debts will give a false picture of your current situation.
See Chapter 4 in Investing for Retirement - Surviving a Financial Tsunami for more details.
An electronic version of the Balance Sheet is available. Download the spreadsheet here.
Also, review Cash Flow Analysis and Preparing a Budget.