I always feel a lot better when I remember that Net Worth has to do with money, not value. It is simply an exercise to figure out where you stand financially at a given point in time, and the start of the New Year is a good time to make that measurement. Because of taxes, financial organizations have to report your status at year-end, so all accounts should be coordinated at that time.
Net Worth lets you -
- step away from the monthly chore of paying bills and get a better sense of your overall financial position,
- assess the impact of last year’s spending on your finances,
- highlights the performance of your various assets, and
- establishes a basis to plan for the coming year.
To develop your own Net Worth report -
- Use Zillow to assess the current value of your real estate.
- Estimate the value of all the other things you own - i.e. autos, boats, lawnmowers, appliances, furniture, clothing, jewelry, books, computers, etc. This estimate will simply be a best guess of what your things are worth. You can sharpen the estimate by taking the current price of a replacement item and multiplying it by the percentage of useful life left in the item that you own. Use Edmunds or Kelly Blue Book to determine current car values.
- List the year-end amounts of any and all financial accounts individually.
- Any items not held in an account, e.g. shares of common stock or US Savings Bonds, should be valued as of December 31st.
- Do not forget to include the cash value of any life insurance accounts.
- The total of everything above is called your Total Assets.
Next -
- Capture the outstanding amounts of everything that you owe - i.e. mortgages, loans, credit card accounts, etc. List these liabilities individually.
- List the amounts of any outstanding assessments, e.g. homeowner’s associations, that you are liable for but not yet billed.
- Estimate the amount of taxes that will be due in April.
- The total of everything in this section is called your Total Liabilities.
Finally -
- Subtract your Total Liabilities from your Total Assets to determine your Net Worth.
- With this basis, start planning your changes for the coming year. After all, you’re worth it!
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