Assets and liabilities: the sorting exercise on your own list

A blank page with the word "Assets" at the top. Pen in hand. The first thing written down is the car. Then the flat, if there is one. Then, after a pause, the new phones, the laptop, maybe the ring.

Then you stop. The list looks impressive, but something doesn't add up. If you have this many assets, why doesn't it feel like you have any wealth? And what usually doesn't make the list at all is exactly what belongs on it: the keren hishtalmut (קרן השתלמות), a tax-advantaged study fund, the pension fund, the kupat gemel (קופת גמל), a long-term savings fund. Money that is truly yours, and that you hardly ever see.

The story that explains it is "we just don't understand this stuff." But the difference between assets and liabilities isn't expert knowledge. It is one question nobody taught you to ask.

Two shortcuts about what an asset is

The first shortcut: an asset is anything expensive you own. By that logic the new car is an asset, and the feeling is of wealth that never turns into anything.

The second comes from popular money books that split the world into black and white: "your house is not an asset", "your car is a liability". It sounds sharp, but it leaves more confusion than before. You do live in the house, and the car does get you to work.

The accounting definition is far from how the word is used at home. The Conceptual Framework of the international accounting standards (IFRS, 2018 edition) describes an asset as an economic resource you control, meaning a right with the potential to produce economic benefits, and a liability as an obligation to transfer an economic resource. By that definition the car is an asset too. This exercise asks a different, household question: what does the item do to your month, and to its own value over time? It isn't that you didn't understand. Nobody taught the sorting.

Pride in what you chose

Part of you wants a true picture: to know what actually works for the family, and what the family works for.

Part of you would rather not find out that the car you chose so carefully is a cost and not an investment. There is something legitimate you are protecting there too: pride in the things you chose. You bought them because you wanted them, and there's nothing to apologise for.

Both are fair. So this exercise doesn't ask you to sell anything or judge anything. It adds a column.

Asset or liability: one question that sorts everything

For each item, ask one question: what does it do to your monthly cash flow, and what happens to its value over time? That gives you three columns:

• Asset: stays yours and holds its value or brings money in. A study fund, for example: the deposit comes off the payslip and a management fee is charged on it, yet the balance is yours.
• Liability: a debt, with a balance and a monthly payment. A mortgage, a loan, a card instalment plan.
• Looks like an asset: it has value, it's yours and you love it, but it costs money every month and loses value. The car, most of the time. This column doesn't judge; it simply doesn't count the item as wealth.

A small warm-up before the list

Your family car, which column does it go in?

Pick the answer closest to yours. There is no wrong one.

Asset, it's worth a lotLiabilityLooks like an assetNot sure

Here is what a family balance sheet looks like for an example household, with what each item does every month beside it:

The figures are illustrative. What matters is the structure: every line has a column, a value, and what it does to your month. The home is marked as a grey case; more on that below.

One page, nothing changed

What you are after here is to see on one page what works for you and what you work for. No selling, no closing, no changes this week. And no judging what you chose to buy. Just a picture.

Building a family balance sheet, line by line

1. Write down everything, including what you never see. Pension funds, study funds, provident funds, child savings. These are the items people forget, and sometimes they're the biggest on the list. How a study fund works is in our keren hishtalmut guide.

This mapping is for the picture only. Choosing a track, transferring or withdrawing from a pension fund, study fund or provident fund is pension advice when it is given to a specific person; this article describes how things work, and a licensed pension adviser can look at your own case. Average management fees for funds are published in the Capital Market Authority's public tools, Gemel-Net and Pension-Net.

In AlphaHome: On the pension and long-term funds page you type in each account's balance and its two fee rates from the quarterly statement, and everything is totalled into the household's net worth. You can link each account to its fund in the public datasets and see the fund's published average fees beside yours, as a table with no verdict.

2. Ask of each item, does it cost, earn or hold value. Not "good or bad". Only what it does.

3. A monthly cost next to every item. This is where a lot comes to light. Something that looks like an asset and costs 1,800 ILS a month is a choice, and it's fine to choose it. Now it is a choice with a number.

4. Every liability with a balance and a monthly payment. Mortgage, loans, instalment plans. Two columns, no commentary.

In AlphaHome: The mortgage is entered as tracks, each with its balance, rate and years left, and the monthly payment splits into interest and principal. The net worth on the properties page brings together home equity, savings, long-term funds and trading capital. The car and any other loans stay on your own sheet.

5. Come back to the list every quarter. When the quarterly statement arrives, update the balances. Fifteen minutes. How the whole list adds up to one figure is in our net worth guide.

Grey cases and unpleasant discoveries

The home you live in, the car you need for work. These are the cases with no single "right" answer. A home can hold its value over time and it saves rent, but it brings no money in and costs something every month. Write down both the value and the cost, and leave it there. The trade-offs between buying and renting are in buy or rent.

A forgotten loan. Sometimes the list uncovers something: an old instalment plan, a small loan taken two years ago. This isn't a moment for blame. Today: write it down with its balance and payment. Next time: add a line to the list for every new debt on the day it's taken, rather than waiting for the quarter.

What's yours, what you owe, and what you love

Without sorting, the same feeling will likely stay: lots of things, and wealth you can't feel. Not because you have none, but because it is scattered across the bank statement, the quarterly report and the parking space.

With one list, three columns and a monthly cost, something settles. You know what's yours, what you owe, and what you love without counting it as wealth. The car stays in its space, the pride stays where it was, and the wealth that was scattered finally gets one page.

This week: on the pension page, type in the balances from the latest quarterly statement of every pension fund, study fund and provident fund, and write the three columns for everything else on paper.