Obtaining a good grasp of your personal finances starts with a good understanding of what you “own” and what you “owe”. The tool to use is a statement of net worth. To understand and measure your progress in your journey to financial independence, the statement of net worth gives you that scorecard on a given day.
For most people, preparing this statement quarterly is sufficient. Some people may want the information monthly and that’s ok too. The cash, marketable securities and retirement account balances can be obtained from a statement or through online access. If you don’t know the value of your house, you can use an online source like Zillow or Trulia. NADA or Kelly Blue Book will give you the value of your vehicle.
The liability balances can be obtained from a recent statement or by viewing your account online. To find your net worth from this point, simply take the total of all your assets and subtract your total liabilities from your assets. The result is your net worth.
As you first start this process, don’t be surprised if your net worth is small or even negative. Don’t be discouraged by that number. Remember you are doing this to have a periodic measurement as to where you are on your financial journey.
Some quarters your net worth may go down. Again, don’t be discouraged. Your progress on this journey is not going to be linear.
Get your FREE one-page statement of net worth template. Use this statement as a tool to help you have a better understanding of your finances.
Your finances. Your journey. Your way!
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