Assets and liabilities
Use the same valuation date for assets and debts. List the source of each estimate so you can update the calculation when the figures change.
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Using a personal balance sheet
Start with balances as of a single date. List debts beside assets and distinguish readily available funds from property or other holdings that may take time to sell. Repeating the exercise periodically helps show which changes came from debt repayment and which came from new valuations.
When applying this idea, write down the assumptions behind the decision and the evidence that would cause you to change course. Keep the review date visible so the decision can be revisited as the facts change.
Building a personal balance sheet
Start with assets and liabilities on a single date. Record bank and loan balances from statements and identify estimates for items such as property. Keeping the valuation date and source next to each figure makes it easier to update the sheet without confusing current balances with older estimates.
For example, if assets total $300,000 and liabilities total $180,000, net worth is $120,000. Paying down $5,000 of debt from newly earned income changes the balance sheet differently from paying it with $5,000 of existing savings. Track both sides so the change is clear.
Separating cash flow from net worth
Paying a loan with existing savings reduces cash and debt by the same amount before fees. The total net worth stays the same, even though the amount of cash available for an emergency falls.