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Where do you stand? Calculate your net worth
To manage your money successfully, you need a standard by which you
can measure your economic progress. One gauge of your financial headway is
your personal net worth. You can estimate your net worth by preparing a
simple personal balance sheet that will allow you to see your assets and liabilities
and where your money is going. You can then take steps to make your net worth
grow by finding ways to control spending, reduce debt and increase savings and
Prepare Your Balance Sheet
You will need a block of uninterrupted time, pen and paper or your
personal computer. (Once you have an initial estimate, you can go into a more
in-depth analysis, if you wish.) Here's what to do:
1. List your assets (everything you own that can be sold or swapped for
another item of value). Include your house, car, household goods, jewelry, bank
accounts, stocks and other investments, vested holdings in company savings
and pension plans, individual retirement accounts (IRAs) and cash-value life
2. List the market value next to each asset.
3. Total your assets.
4. Separately, list your liabilities. Record all debts, including credit
card and charge card accounts, mortgage, home equity line of credit and
other loans, such as automobiles or college.
5. Note the principal amount due next to each liability. Do not include
6. Total your liabilities and subtract them from your assets.
The result of these calculations is your net worth. (If assets exceed
liabilities, you have a positive net worth. If liabilities exceed assets, your net worth
is negative.) You now have a foundation for working toward making your
bottom line grow.
Reorganize Your Priorities
Your balance sheet can help you determine whether your finances are in
line with your goals. Depending on your objectives, you may want to pay
down old debts or postpone new ones, initiate a savings plan, go on a stricter budget
or begin a more aggressive investment policy.
Recalculate your net worth annually, and you'll be able to assess your
progress and work toward improving your money management. Your
financial recordkeeping will benefit, too.
Yvonne Hall is First Vice
President, Fiancial Advisor and a Certified Planner for Morgan Stanley Dean
Witter, located at 1640 N.W. Gilman Boulevard, Suite B1, Issaquah. She can be
reached at (425) 888-9242 or (425) 837-8401.