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If you want to improve your financial life, you must know where you are starting. The net worth statement provides you a snapshot of where you are financially based on your past financial decisions. Do not make the mistake that many folks make by measuring themselves based on their income or how much in the way of “stuff” they have. It’s not how much you make or have; it’s how much you end up keeping after the fact!
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Complete your net worth statement one time every year, preferably around the same time of the year. Take your time and identify the value of each asset you have on one particular day and how much you owe on each liability on that date, as well. Place those numbers on the net worth example that you can find on this website.
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Add your assets and your liabilities separately to identify the total of each amount. Take your assets and subtract your liabilities. This is your net worth. Don’t freak out if it is negative. My first one was negative, too. Chill out and don’t beat yourself up about it. The key is to get some real numbers down on paper and see where you are. This is your starting point. This is also the time to take responsibility for your situation. You are the answer!
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Go back and fill these numbers in on your financial plan. Start making your short and long-term goals for the coming year. This is where you attempt to increase your appreciating assets (stocks, bonds, and real estate) while decreasing your liabilities (pay off debt at an accelerated rate).
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Repeat this process next year, the year after, and for many years to come. Hold yourself accountable every year as you strive to increase your net worth from the previous year. If you are on the right course, you will see your net worth go up in most years (there will be a few years where it may go down as your stocks, bonds and real estate take their occasional nosedive in their respective markets).
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Take control of your financial life. If you don’t, someone else will!
Example
Use the following Spreadsheet as an example of a net worth statement. Download to your computer or other device and off you go!