September 21, 2014
What is a net worth statement and why should a person complete one each and every year?
What is a net worth statement and why should a person complete one each and every year?
A net worth statement tells you how much you have financially, it is your assets minus your debt, you should do one every year so you know how you are sitting financially, if you have alot of debt and are in the red you will know you need to turn things around, if you do that every year you can see if you are improving your financial well being, the net worth statement goes very well with a financial plan and are normally good to do together.
Well said, Garrett. Let’s recap.
The net worth statement tells you where you are financially. Far too many people gauge their financial success by the income level and/or “stuff” they may own. That is a mistake.
You can go to the net worth tab on this website to download an example of a net worth statement and do one yourself. Directions can be found on that tab as well. This should be done 1 time each year as you track your progress (or decent). Take control!
A net worth statement is your assets (car, liquid savings, investments, etc) minus your liabilities (debt). Ideally, the only liability would be a mortgage. But that is just not the case for the vast majority of people. It tells you how much you ARE worth…not how much you think you are because you have nice things.
Everybody should complete one annually to see where they’re truly at financially speaking. Say a person gets a raise, but they upgrade their lifestyle at the same time. They might think that their net worth has increased because of the extra income, but a net worth statement would tell them otherwise because of extra spending/debt they might be taking on.
Well said, Bobbi. You understand the issue quite well. Continue to add to the discussion in the coming weeks. Onward!