How to Build Your Net Worth

What is Net Worth?

Simply put, net worth is what you get when you subtract your liabilities (what you owe) from your assets (what you own). Here's a free worksheet to get yours started: BUILD Your Net Worth

Before you can get where you want to go in life, you need to know where you are. Wisdom tells you to determine your net worth BEFORE your children apply to college . . . BEFORE you move forward on that master suite addition . . . BEFORE you join the country club with the best pro course . . . BEFORE you bail a family member or friend out a financial bind . . . or BEFORE you pay cash for that vacation home in Belize.

What Are the Benefits of Tracking Your Net Worth?

Your net worth  statement gives you the results of all your past financial decisions in one place to help you be more intentional about your financial decision making.

Ideally, your net worth should be growing over time. Unless you track it, you won't know. Regular tracking will help you see where you need to cut back and where you can increase.  You'll feel more secure when you're not in the dark.

Peace of mind comes in other ways, too:

  • It lets you see your entire financial picture in one place

  • It helps you stay in control of your financial life

  • It reflects the sum of all your little (and big) financial choices

  • It can help you build better financial habits

  • It helps you identify opportunities and risk in your financial life

  • It helps you PLAN WELL for your family’s future

  • It helps you focus on things you can control

  • It is a great tool for better financial communication with your family

What Do You Include in Your Net Worth Statement?

Here is a list of assets and liabilities to consider when creating your net worth statement.

Taxable Assets:

  • Bank, investment and money market accounts

  • Cash

  • Stock certificates and options

  • Business and partnership interests

  • Precious metals and gem stones

  • Art and collectibles

  • Automobiles, RV’s, boats

  • Home, vacation home, and other real estate

Tax-Deferred Assets:

  • 401(k), 401 (b), and 457 plans

  • IRA’s and fixed and variable annuities

  • Deferred compensation plans

  • Life insurance and Series-1 savings bonds

Tax-Free Assets:

  • ROTH 401 (k)

  • ROTH IRA(s) and Coverdell IRA(s)

  • Health savings account

  • 529 college savings

Liabilities (Debt):

  • Mortgage, 2nd mortgage and/or home equity loan(s)

  • Auto, boat or RV loan(s)

  • Credit card(s)

  • Personal, student and/or business loan(s)

To determine your net worth, ADD up your taxable, tax-deferred and tax-free assets. Then SUBTRACT the total of your liabilities from the total of your assets. The difference is your net worth.

I’ve created a free worksheet for you called BUILD Your Net Worth. Just click, print and complete to determine your net worth. Once you've completed your net worth statement, update it every six months and use it to make more intentional financial decisions.

Remember, each person’s situation is different. You should consult your investment, tax, legal or relevant professional before making any long-term financial decisions.

Have a question about building or using your Net Worth Statement?

Ask me below or  Tweet to @roger_whitney. I'll respond personally.

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