Net Worth Statements

Introduction

A net worth statement is an important financial document. It is a ‘financial snapshot’ that shows your financial wealth at a given point in time. A net worth statement provides a useful summary of your financial affairs and can measure your financial well-being. 

Why should I complete a net worth statement?

A net worth statement is a tool to help you measure progress toward long-term financial goals. You may use one in different ways. It provides an inventory of your assets (what you own) and your liabilities or debts (what you owe). 

If you prepare a net worth statement at about the same time each year, you will see how your total net worth changes from year to year. You will want to see if your assets are increasing and your debts are decreasing over time – that is, if you are building wealth. If your net worth has declined from the past year, this may tell you changes are needed for you to live within your income and provide for the future. Having savings, investments, and debts can make it difficult to know if you are spending more money than you have coming in. A net worth statement can help you see your total financial situation. 

The estimate of the value of your home and contents may help you decide how much homeowner’s insurance you need to purchase. The total of your liquid assets (assets that can be quickly converted to cash) may provide information about how well prepared you are for a financial emergency or loss of income. 

You may be asked to fill out or provide a net worth statement when you apply for a home or auto loan or talk to an estate planner. 

If your goal is to analyze your retirement savings, you may be interested in the projected future values of your investments. Your financial advisor should be able to help you estimate the value of investments at some time in the future using current values on your net worth statement. 

Step 1: Calculate the value of your assets.

List all of your assets (what you own) on the net worth statement worksheet. Use the current market value or today’s dollar value for each item. This is the amount you could sell the asset for today, not what it cost when it was new. 

• The cash value of a whole life insurance policy can be found on a schedule in the policy. It is also available from your insurance agent. The cash value is the amount of money the insurance company would return to you if you terminated the policy. 
• Any bank or other vendor of U.S. Savings Bonds can tell you the current value of your bonds. You can also price them online at www.savingsbonds.com.  
• The daily values of mutual funds, stocks, and bonds are quoted each day in larger newspapers and the Wall Street Journal. Values are also available in quarterly reports. Many 
  brokerage firms post share and fund prices on their Web site and are accessible with your personal identification number (PIN). 
• Annuity values are available in annual reports or quarterly statements, or from your broker or Net Worth Statements insurance agent. Human resource officers at places of employment should be able to tell you the amount you have contributed to your pension, 401(k), 403(b), or 457 plan(s). 
• Car values are published by the National Automobile Dealers Association and by Kelly Blue Book. These publications are available in most libraries, at car dealerships, and at lending institutions. You can also find sites on the Internet that list auto values. 
• Estimate the value of household furnishings and appliances by using information from second-hand shops and from classified ads. Use conservative estimates because it is not always easy to sell used possessions. 
• The value of collections – jewelry, furs, and guns – can be estimated by dealers. 

Step 2: Calculate your liabilities.

List all of your debts or liabilities (what you owe) on the net worth statement worksheet. Use the most up-to-date amounts. 

• The balance owed on installment debts or credit cards is listed on monthly statements. If not, the balance can be obtained from the creditor. The principal owed on a mortgage or real estate loan is available from the mortgage lender. Remember to also list second mortgages or home equity credit line loans. 

Step 3. Determine your net worth. 

Net Worth Statement Worksheet

Assets & Personal Property	What You Own	Liabilities	What You Owe
Cash:		Current Debts:
Cash On Hand		Household
Checking Accounts		Medical or Other Current Bills
Savings Accounts		Credit Cards
Money Market Funds		Department Store/Gas Cards
Cash Value of Life Insurance		Loan on Cash Value Life Insurance
Other		Legal
		Taxes Due or Back Taxes
		Other
Real Estate/Property:	(Current Value)	Mortgages:
Home(s)		Home(s)
Land		Land
Other		Other
Investments:	(Current Value)	Loans:
Certificates of Deposit (CDs)		Bank/Finance Company
Savings Bonds		Bank/Finance Company
Stocks		Education/ Student Loan(s)
Municipal Bonds		Business Loans
Corporate Bonds		Personal (from family or friends)
Government Securities		Auto Loan(s)
Mutual Funds		RV/Boat Loan
Annuities		Pledges: Charities, Religious Orgs
IRAs, Roth IRAs		Other
401(k), 403(b), 457 Plans		Other
Pension Plan(s)		Other
Ownership in Business
Loans Owed to You
Other
Auto(s)
RV/Boat
Household Furnishings
Appliances/ Furniture
Collectibles
Jewelry/Furs/ Guns
Other
Total Assets		Total Liabilities

 

Subtract the value of your liabilities from the value of your assets to determine your net worth. 

Total Assets $_________ – Total Liabilities $________ = Net Worth $ _________ 

Step 4. Monitor your net worth annually.

Complete another net worth statement worksheet in about one year and compare the two statements. Completing one each year at about the same time will help you monitor your financial well-being.