Net Worth Statement
A Net Worth Statement is a formal written summary of your assets and liabilities. It is used to measure your progress in accumulating financial wealth where one of your goals should be to have the dollar value of your net worth increase over time.
Basically, there are three ways to increase your net worth over time:
- increase savings (penny pinch)
- increase the market value of your assets, or
- decrease the amount of your liabilities
Note: In order to measure your net worth, your Net Worth Statement should be updated twice a year so that you can monitor your financial progress.
How it works
A Net Worth Statement consists of two separate sections:
- Assets (which lists all the stuff you own with a corresponding dollar amount that represents the amount of money you would receive if that stuff were sold today)
- Liabilities (which lists every outstanding debt that you have)
You can then calculate your net worth by subtracting the dollar amount of your Liabilities from the value of your Assets.
Example of a Net Worth Statement:
|Net Worth Statement|
|Current Market Values:|
|Line of Credit||$15,000.00|
Note: When completing your Net Worth Statement base your current market values upon documented values. In other words, do not estimate or guess at the numbers! For example, if you do not have a current market value for your home, then use the government’s assessed value on your property tax notice. If you recently purchased your home, then use your purchase cost as the home’s value, or if you have a recent professional real estate appraisal, you can use the appraised value. Once you have real numbers punched in to your Net Worth Statement, you’ll have a much better chance at getting a real handle on your financial life.