Personal Net Worth Statements

The stock market took a hit in the fourth quarter this year with December being particularly volatile. Times like these create a sense of urgency where people want to do something. If you want to a difference in your financial life, I suggest turning to your personal balance sheet or net worth statement.

Assets and Litbilities

Every year I prepare a net worth statement for my family. I like to use January 1st as the date each year because it makes for easy comparison to see what progress we are making. I start by listing cash accounts, followed by investment accounts, retirement accounts and education savings accounts. Next, I list cars and real estate since they are less liquid. Some people may have jewelry, art or collectibles that should be listed too but only if you would be willing to sell them in the future. Adding up the total of the accounts gives you your total assets.

Next, we do the same thing for debt or liabilities. This is where you put your mortgage, credit cards, car loans, student loans or any other money you owe. I also recommend listing the interest rate for each. This adds up to your total liabilities.

Finally, you subtract your liabilities from your assets and you have your total net worth.

This is a simple but powerful exercise in personal finance. From a practicality stand point this is invaluable. You'll know which debts have the highest interest rates. You'll know if credit cards are building up over time. You'll see if your assets are growing or stagnant. With this knowledge you can adjust where your dollars are going to keep yourself on track.

The bigger benefit however is psychological. Feeling successful is motivating. To feel successful, you need to see progress. The only way to see progress is to know where you started.

When you look at your net worth statement this year, the investment performance may not have helped. But saving to a retirement plan and paying your mortgage and car loan did. These are concrete steps that make you better off regardless of what the stock market is doing. Seeing progress will help you stay calmer and make rational decisions at a time when the stock market is irrational.

If you need help getting started give me a call. You might like working with me because my only focus is your success.

Bonus Tip: If you're just getting started, we can build out a net worth statement for the last couple years. Most financial websites have statements going back 5-10 years. For your home value or can give an estimate for each of the last few years. This way you won't have to wait to feel good about your progress.

***Disclaimer*** Jake Carris Financial Planning does not sell any insurance or commissioned products. Investments are not guaranteed and contain the risk of loss. Speak to a financial advisor about your specific situation before making any investment decisions.