When was the last time you calculated your household’s net worth? If you haven’t done if for recently, or EVER; you need to read on.
You can’t very well get to where you’re going if you don’t know where you are. Before you really start to move ahead financially, it’s important to get a clear understanding of your current financial picture. This financial picture serves as a benchmark for evaluating progress towards your goals, and it can help shed light on areas you may want to improve.
The best way to do this is to calculate your net worth. Creating a net worth statement is much easier than you might think. In simple terms, it’s what you own minus what you owe.
Before you begin to calculate your household net worth, you’ll need to gather all your current financial records: loan statements, credit card bills, bank balances, and so forth. The more up-to-date and complete the records are, the more accurate your net worth statement will be.
First, list all of your assets – the things of value that you own. Examples are:
• Your home (current market value)
• Your vehicles (blue book value)
• Current value of investments: stocks, bonds, CDs, etc.
• Retirement account balances: 401(k) and 403(b) accounts, IRAs, etc.
• Bank balances: checking, savings, money market accounts, etc.
• Cash on hand
Next, list all of your liabilities – money that owe. Examples are:
• Remaining amount of your mortgage
• Home equity loans
• Credit card balances
• Auto loans
• School loans
Once you’ve listed all your assets, total them up. Do the same with liabilities. Next, subtract the total in the liability column from the total in the asset column to get your net worth.
Now that you’ve calculated your household net worth, you’ll easily be able to update it on a regular basis (we suggest quarterly) to track your household’s financial progress. If you’re interested in improving your household Net Worth, or just put your finances where your priorities are, follow along with our Forget the Joneses Project HERE.