Knowing your net worth gives you a idea of where you are at in life. If you don't know where you currently stand, it is hard to navigate to a different location. Wealth is usually not stumbled upon but statically planned. Preparing now can save you tears and sorrow later. We never know where we will end up but we can prepare the road for the journey.
Net Worth is a simple concept. It is your assets, minus your liabilities. The amount by which your assets exceed the liabilities is positive net worth.
You will need to make a spreadsheet with 2 categories. What you have and what you owe. Here is a link to a sample spreadsheet (Link)
Where do you begin? Well with a cup of coffee and a quiet space to work. Picture you are having a estate sale and you are selling everything you own. You must list the FMV (fair market value) and not what it is worth to your heart. No one cares that grandma gave you the kitchen table. You have to write down the amount it would sell for to a stranger. To make the task easier, list only items that have a $500 or more value. Start with the most valuable items like your home and cars and work downward. Include savings in the bank and CD's, stock and IRA's. Add these items up and this is the value of your "assets."
Next you need to list all your debt. Yes, you listed the FMV (fair market value) of your house but now you have to fill in the big picture as to what you owe on it as well. Start with the largest debts and work downward. If you started at the bottom of my blog, this should be easy since you already listed your debt out in a budget. Add these numbers together and this is your total "liability."
Subtract the liabilities list from the asset list and hopefully you have a positive number! This number can be big, small or negative. What you are hoping, wishing and praying for is that your assets are worth more than your debts. This would mean you have a "net worth." If you owe more money than your assets, then it is time to get down to some serious business of budgeting.
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