What is net worth?
It’s not all about the penthouse condominiums, designer clothes, high-end vehicles and vacations. After all, wealth is not based on what you spend, but rather on the financial assets you accumulate.
Calculating your net worth should be the first step in any good financial plan. Sit down with your financial records and measure the difference between what you own (your assets) and what you owe (your liabilities). Make this exercise part of your annual fiscally fit check-up.
ASSETS:
Liquid Assets $______________
Investments $______________
Real Estate $______________
Personal Property $______________
Miscellaneous $______________
TOTAL ASSETS: $______________
LIABILITIES:
Mortgages $______________
Secured Debt $______________
Unsecured Debt $______________
TOTAL LIABILITIES: $______________
Assets - Liabilities = $________________ Your Net Worth
Definitions:
Liquid assets: money that you can access easily, such as your checking and savings accounts, money market accounts and certificates of deposit (CDs), and treasury bills.
Investments: any stocks bonds, stock options, mutual funds, annuities, life insurance, and money in retirement plans. Use the current value or after-tax value for each.
Real Estate: Insert the market value of your primary residence and any vacation homes or investment properties. Since this is likely your largest asset, don’t just make a wild guess at this number.
Personal Property: A lot of items can fall under this category: cars, motorcycles, boats, jet skis, ATVs, jewelry, furs, wine, electronic equipment, artwork and collections. Use current market value.
Miscellaneous: Insert the value of anything that doesn’t fall under one of the listed categories. This could include equity in a business or a trust fund.
Mortgages: Your home mortgage is probably the single greatest liability you have. Your year-end statement from your lender should show exactly how much is still owe on your property. Include the principle owed on any other real estate - vacation home, timeshare.
Secured Debt: This kind of debt is comprised of any items that can be recovered by the lender upon default of the loan. This includes cars, trucks, motorcycles, boats, jet skis, ATVs, and business loans. Use the total balance of all secured debt.
Unsecured Debt: This is the most painful part of this process. This kind of debt is personal loans, such as student loans, renovation loans, and the biggie for many folks - credit cards. Your creditors are consistent about reminding you of these debts, so calculating the amount owed should be fairly simple.