Net worth
Your Net worth is simply the amount by which your assets exceed your liabilities.[1]
One way of tracking it is with a net worth statement. You might also want to prepare statements that value your estate for any estate tax, as well as a statement showing the amount subject to probate.
Net worth statements
A net worth statement shows the market value of your assets, and how much you owe in debts, at a particular time. (This is different from an income statement or a budget.) For example, you might create a net worth statement for yourself as of December 31, 2022. The difference between the total value of your assets and the total of your debts is your net worth.[2]
Reasons for creating a net worth statement include:[2]
- To check your progress towards your financial goals
- To plan for changes in assets or liabilities
- To minimize your tax liability
- To estimate how well your dependents could live off an inheritance if you were to die in the near future
- To determine how much life and property insurance you need
- As a reminder to adjust your insurance coverage or assets
- To estimate your retirement savings progress
Assets
For U.S. citizens, assets in your net worth statement might include:
- Your checking and savings accounts balances, and the balance of any CDs
- The market value of stocks, bonds, and mutual funds and Exchange-traded funds (ETFs) in investment accounts
- The current value of any 401(k), IRA, and similar retirement plans
- The market value of your home, and any other residential or rental real-estate
- Cash value of insurance or pensions
- Market value of personal property: for example cars, furniture, and jewelry
- Other assets: for example, business related assets, such as business value and notes receivable
Liabilities
Your liabilities would include:
- Credit card balances
- Lines of credit balances
- Car loan balances
- Mortgage balances
- Student loan balances
- Other debts
- Taxes due
The following table shows an example net worth statement.[note 1]
Category | Amount |
---|---|
Assets | |
Cash | $1,000 |
Checking | $5,000 |
Savings | $5,000 |
Securities[note 2] | $25,000 |
Accounts/Notes Receivable | $0 |
Real Estate | $250,000 |
Household Goods | $2,000 |
Vehicles | $5,000 |
Cash Value Life Insurance | $0 |
401(k) Plan | $75,000 |
Individual Retirement Accounts | $30,000 |
Other Assets | $0 |
Total Assets | $397,000 |
Liabilities | |
Notes Payable[note 3] | $20,000 |
Accounts/Bills Due | $1000 |
Credit Cards Payable | $1000 |
Vehicle Loans | $5000 |
Unpaid Taxes | $0 |
Real Estate Mortgages Payable | $200,000 |
Land Contracts Payable | $0 |
Life Insurance Loans | $0 |
Other Liabilities | $0 |
Total Liabilities | $227,000 |
Net Worth | $170,000 |
Total Liabilities and Net Worth (Assets always equal Total Liabilities and Net Worth) |
$397,000 |
Notes
References
- ↑ "Net Worth: What It Is and How to Calculate It". Investopedia. March 9, 202. Retrieved August 24, 2023.
- ↑ 2.0 2.1 "Personal Financial Statements" (PDF). The Center for Financial Studies, South New Hampshire University, FINRA Investor Education Foundation. 2010. Archived from the original (PDF) on February 18, 2015.
- ↑ "Sample Personal Financial Statement". FindLaw.com. May 17, 2021. Retrieved August 24, 2023. (Figures added)
External links
- Net worth, from finiki
- What is your net worth?, from the Federal Reserve Bank of Dallas. Archived from the original on June 16, 2016.