Chapter 70. What's Your Net Worth?

YOU NEED A BALANCE SHEET to show what you own and what you owe as well as the decisions you've made about spending your money over the years. It should be divided into two broad categories: assets, or what you have, and liabilities, or what you owe. The assets category is subdivided into three smaller categories: liquid, investment, and personal assets.

Net-Worth Statement

 

Liquid assets

 

Cash (checking, savings accounts)

$_______________

Certificates of deposit

$_______________

Money market funds

$_______________

Other

$_______________

Total liquid assets

$_______________

Investment assets

 

Stock

$_______________

Bonds

$_______________

Mutual funds

$_______________

Life insurance cash values

$_______________

Investment real estate

$_______________

Limited partnerships

$_______________

Collectibles

$_______________

Precious metals

$_______________

Other

$_______________

Total Investment assets

$_______________

Personal assets

 

Personal residence

$_______________

Vacation home

$_______________

Automobiles

$_______________

Household furnishings/rugs/art

$_______________

Clothing/jewelry

$_______________

Computer equipment

$_______________

Total personal assets

$_______________

TOTAL ASSETS

$_______________

Now list everything you owe:

 

Short-term debt

 

MasterCard/Visa/Discover/American Express

$_______________

Bank overdraft line

$_______________

Home equity loans

$_______________

Student/business loans

$_______________

Car/equipment loans

$_______________

Other debt

$_______________

Total short-term debt

$_______________

Long-term debt

 

Home mortgage

$_______________

Mortgage on second home

$_______________

Other long-term debt

$_______________

Total long-term debt

$_______________

TOTAL DEBT

$_______________

Now subtract your liabilities—or debt—from your assets. That's your net worth. Look at how your wealth is spread among the three asset classes. To be prepared for emergencies, you need three months' worth of living expenses in liquid assets. If you are approaching retirement, you should increase your cash to three years of living expenses.

If your balance sheet shows that most of your assets are in the personal category, think about changing the way you deploy your money. You should aim to increase your net worth each year—by paying down debt, paying off your mortgage, pumping more money into your 401(k) account and other investments.

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