Take a look at what you own—and what you owe

You may own a car or a home or have money in the bank. Add it all up, and it can seem like you have a lot going for you. But is that the whole picture? Not really. Because to truly know what you have, you also have to factor in what you owe on those things.

The combination of what you own (your assets) and what you owe (your liabilities) makes up your personal net worth. Knowing your net worth is important for two reasons:

• It lets you understand your current financial situation.
• It gives you a reference point for measuring progress toward your goals.

Ideally, as you continue to earn and save, your net worth will grow. If your net worth is low or in the red, you’ll need to work on saving more and spending less. To watch your progress, calculate your net worth now and recalculate it once or twice a year.

How to set up a personal net worth statement

Setting up a net worth statement is as easy as creating a simple checklist and doing some basic math.

1. List your assets (what you own), estimate the value of each and add up the total. Include items such as:
   • Money in your bank accounts
   • Value of your investment accounts
   • Your car
   • Equity in your home
   • Business interests
   • Personal property, such as jewelry, art, furniture
   • Cash value of any insurance policies
2. List your liabilities (what you owe), and add up the outstanding balances. Include items such as:
   • Mortgage
   • Car loan
   • Credit card balance
   • Student loans
3. Subtract your liabilities from your assets to determine your personal net worth.