Net worth statement

Net worth statement
See also

A net worth statement is a formal report that shows what an individual owns, what an individual owes, and the difference between the two [1]. According to Hofstrand D., a net worth statement or the balance sheet is designed to provide a picture of the financial soundness of business at a specific point in time. A net worth statement is usually prepared at the beginning and ending of the accounting period, but can be done at any time [2].

In the view of S. Spann "A net worth statement is essentially a roadmap for securing and building your financial future. It is also commonly referred to as a balance sheet. The net worth statement provides a snapshot of your current financial situation. Figuring out your net worth is a fairly easy calculation. Your net worth is simply defined as the difference between all the things of value that you own, and all the debts you owe. In financial terms, your net worth is your assets minus your liabilities" [3].

There are three possible outcomes for your net worth analysis [4]:

  • Assets equal liabilities
  • Assets are greater than liabilities
  • Assets are less than liabilities

Creating a net worth statement

"Part One: Your Personal Assets (total these amounts) [5]

  • cash (checking, savings, on-hand)
  • certificates of deposit
  • money-market accounts
  • investments such as stocks, bonds, mutual funds, etc.
  • vested dollar amounts of retirement accounts such as 401(k), 403(b), IRAs, Keoghs, annuities, etc.
  • life insurance cash value
  • estimated market value of your home
  • other real estate owned
  • all personal property
  • trust funds
  • valuation of your business

Part Two: Your Personal Liabilities (total these amounts)

  • department store charge-card balances
  • credit-card balances
  • unpaid mortgage balance (include first trust deed and any equity line or seconds)
  • unpaid auto loan balances
  • medical loans
  • student loans
  • other loans, including personal property loans
  • medical and dental loans
  • other long-term obligations"

References

Footnotes

  1. C. Bienias Gilbertson, M. W. Lehman, D. Gentene 2014, p. 7
  2. D. Hofstrand 2019, p. 5
  3. S. Spann 2009, p. 52
  4. S. Spann 2009, p. 53
  5. T. Duncan 2000

Author: Gabriela Wojtaszek