Are you wealthy? Know your Net Worth
Take a look at what assets you own and how much debt you owe to create a personal balance sheet.
You may own a business, real estate, or have retirement accounts and money in the bank. Add it up and it seems like a lot. But to truly know whether you are wealthy, you have to factor in what you owe.
The combination of what you own (assets) and what you owe (debts) make up your net worth.
Tracking your personal net worth is important:
It lets you understand your current financial situation.
It gives you a reference point to measure progress toward goals.
Ideally, as you earn money and invest, your net worth will grow. If your net worth is low or negative, you will need to save more and spend less. To track progress, calculate your net worth today and update it once a year.
Your financial advisor can help you with strategies to increase your net worth. These may include investing more in the stock market, creating a debt reduction plan, or renting out a rarely used vacation home.
You can calculate your net worth on your own or ask a financial advisor or your CPA for assistance. Here is a file to calculate your personal net worth. There is one tab for assets and anther for debts. The first tab displays your personal net worth.
How to set up a personal net worth statement:
1) List your assets (what you own), estimate the value of each and add up the total. Include the following:
- Money in bank accounts
- Value of investment and retirement accounts
- Cash value of life insurance policies
- Market value of home(s)
- Business interests
- Personal property such as art, jewelry, furniture
2) List your debts (what you owe) and add up the outstanding amount. Include the following:
- Car loans
- Credit card balance(s)
- Student loans
3) Subtract your total debts from your total assets to determine your personal net worth
4) Update your personal net worth each year after you file your income taxes.