Knowing your net worth can be a valuable budget tool when it comes to evaluating your personal financial progress. By understanding your net worth, you can make financially smart moves to improve your overall financial situation. Simply put, every sound financial move you make could increase your net worth, while a poor financial decision could decrease it.
By calculating your net worth, you'll have a snapshot that will allow you to evaluate your existing financial health, and help you proactively determine what you need to do to get back on track or to reach your financial goals.
Wondering how to get started?
A good place to begin is with a type of financial budget tool such as a net worth worksheet that you can modify according to your specific needs. First, determine your total amount of assets such as what's in your bank and retirement accounts, investment accounts, stocks and bonds, and personal property - including your home. Then, move onto your liabilities (debts). The final step is to calculate the difference between your assets and liabilities.
If your worksheet shows you are in the negative, then you owe more than you own. If the number is positive, you own more than you owe. It's important to keep in mind that a negative net worth doesn't indicate you are financially irresponsible, but that you may need to make some modifications to your existing budget, investment allocations, or simply reduce some of your debt.
If you're ready to see how fiscally fit your net worth is, try using one of the following worksheets as a basic budget tool, or create your own using a spreadsheet.
- The FINRA Know Your Net Worth worksheet
- CNN Money's, What Are you Worth? Worksheet
- Morningstar.com's Net Worth worksheet