How to Create a Personal Statement of Net Worth

A personal statement of net worth is sometimes referred to as a balance sheet because it does just that. It is a neat way of balancing your material possessions; the physical things that you own and even those that are still mortgaged to the bank, against all your financial obligations. The best possible scenario is for your assets to outweigh your liabilities because this would mean that you have a positive net worth but even if you are in the red a personal statement of net worth can help you to track your position and calculate how much further you need to go before you are in your comfort zone.

List Your Assets

Assets should include everything that you own, from your cash and other investments to your car or your jewelry. Everything that can be sold or converted into cash should be listed under the assets column in order of the least liquid (or the hardest to convert to cash) to the most liquid (or the easiest to convert to cash). Your assets may include clothes, an art collection, motor vehicles, a stake in a business or stocks on the exchange. It can also cover your house even if it is still under mortgage.

List Your Liabilities

Liabilities refer to any amount that is owed to a third party. It does not matter if that loan is secured or unsecured, as long as you have an obligation to repay a person or an institution it should be mentioned in the liability section of your personal net worth statement. Some of the items that appear under your assets column might also be listed here if you purchased them with a loan. The difference is that under the assets side the figure would represent the market value or the current resalable value and under the liabilities section you would use the amount that is outstanding on the loan. For instance, if your house is valued at $250,000, you entered into a loan for the amount of $225,000 to finance the purchase of the home but you have already repaid $100,000 then under the assets side your home would be valued at $250,000 but on the liabilities section you would enter $125,000.

Calculate Your Net Worth

When you have listed everything you own and everything you owe it is time to calculate your net worth. All you need to do here is subtract the total of your liabilities from the total of your assets. This would give you the figure that represents your “net worth”. By repeating this process every year you can chart your financial situation and hopefully will find a pattern of progressive growth.