What is your net worth?

Net worth is equal to the assets minus the liabilities for family financial health.

What is your net worth? Do you know?

Simply put, net worth is the amount of assets you have minus the liabilities.

What is an asset? An asset is anything of value the will increase the net worth. Assets can be divided in to four categories: cash, investments, personal property and retirement accounts. The cash category includes cash on hand, money in a savings account, Certificate of Deposit (CDs) and money market accounts. In the investment category are annuities, bonds, stocks, cash value of a life insurance policy, mutual funds and real estate. The personal property category includes cars, boats, homes, motor homes, jet skis, ATVs, furniture, art, antiques, collectibles, musical instruments and jewelry. The final asset category is the retirement funds. This category includes employee pension plans, individual retirement accounts (IRAs), 401(k) and 403(b) accounts.

An appreciating asset is one that increases in value over time. It makes money the longer it is owned. Homes and investment portfolios are examples of appreciating assets. A depreciating asset is one that decreases in value over time such as a car.

When it comes to financial liabilities, what are they? A financial liability is money owed to others on a regular basis. Financial liabilities include mortgage, home equity loan, bank loan, car loans, personal loans, student loans, loan from a relative or friend, cash advances, medical bills, taxes owed, alimony/child support owed, credit card debt and any other type of debt. The liabilities decrease the net worth value. The way to decrease the impact of liabilities is to eliminate the debt. Consider developing a pay-down debt plan to decrease the impact of the liabilities.

Now set up a chart with two columns. (There are also pre-made charts available from About.com and CNNMoney) One column is for assets. The other column is for liabilities. Under the asset column the list should start with the larger ticket items such as the house. Make sure to use current market value of the house not what it was bought for. List the following items as well: cash on hand; cash in a savings account, CDs and the market value of the car and other vehicles. To determine the value the cash and investment categories use the latest statements on these accounts. For the personal property list only the items that are worth more than $500.

Take all of the assets listed and add them up. This number represents the total asset amount.

For the liabilities column start with the unpaid balance on your mortgage. Next list the unpaid balance on the car or other vehicles. Next list all of the personal debt such as credit cards, personal loans, medical bills and anything you owe money on.

Once the liabilities list is complete, add up the numbers. This will be the total liabilities.

The final step in determining the net worth is to subtract the liabilities number from the asset number. The answer is the net worth at this point in time. Whether the number is large, small, or in the negative, it is a starting point. It will be the basis for comparison in the future. Michigan State University Extension and MI Money Health recommends figuring your family’s net worth on a yearly basis. This will provide a snap shot of the household financial health.

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