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What Do You Think You're Worth?

The title question isn't about your intrinsic value as a human being. All people are valuable to society, at least until their behavior proves they can't be set free to harass everyone else. The question has to do with your financial value, your "net worth", and that's a whole different issue.

Net worth means the total value of everything you own minus the dollar value of everything you owe. Just for kicks, how about if you take a wild guess-this very minute-of your net worth. Write down the number somewhere so you can find it later.

What I'm proposing you do next, or in a couple of days at least, is a net worth calculation which you can compare to your ball park estimate. Who knows, you may be pleasantly surprised when you make the comparison, or you may be rudely taken aback, but in either case one's net worth is a good thing to know and the task of making the calculation will be worth the effort you put toward doing it.

You can think of net worth as a "snap shot" of your financial status taken on one particular day, understanding that your net worth changes from day to day as you pay your bills and deposit your earnings. Taking that snap shot from time to time will help you see how your finances are progressing-or show how they are not progressing too, I suppose. Either way, net worth is important information to have when you're trying to get a handle on personal or family finances.

The process isn't hard to do, but it will take some time. So, pour yourself a glass of your favorite beverage, line up your calculator, pens, and paper, take a sip, and GO!

Title your first sheet something like, "Assets," or "What I Own," or "MINE!" What might you title your second sheet? You guessed right, "Liabilities", or "What I Owe", or "NOT MINE." You'll probably work back and forth between the sheets as you do your research, but let's start with "MINE."

On the MINE sheet you'll list everything you have, all your assets, with a value figure for each.

List everything you can think of.

• The equity in your house, condo, or apartment if you're buying one of these, will come readily to mind. Your equity will be the price your house can be sold for minus what you still owe on it. If you have no idea about the value of your property, talk to a realtor who can look up computer listing of comparable recent house sales in your area.
• For the value of the contents of you home, look on your household fire insurance policy and find the amount for which the contents are insured.
• List your vehicles, boats, or other large, "adult toys."
• Look on your bank statements for savings and checking amounts.
• Life insurance is an asset. ( While it might not do YOU much good, your heirs will be grateful for your thoughtfulness once they pass through the grieving process.)
• List any investments you have and their value, including any tax deferred plan your employer may have made available to you.
• If you and your fellow employees have a pension plan, find out what that is worth.

You get the idea of what sorts of things to look for from this short, incomplete listing, so continue listing everything, and then add up all the numbers. You now have a grand total of your assets, that is to say, "MINE!"

That was probably fun, huh? Were I to hazard a guess, I'd say you were probably pleasantly surprised if you've never done this work before. You probably own more value than you ever suspected. The next task won't be quite as much fun because we have to figure out the "NOT MINE" side of our little arithmetic problem.

On your second sheet, begin listing everything you owe complete with figures for each item. You'll list everything including the principal still owed on your house, your credit card balances, the amounts you still owe on your vehicles and other large toys, along with any and all other obligations you've made. Once your second sheet is as complete as you can make it, run a total. You now have a "snap shot" of your liabilities, and the total is NOT MINE.

Now you subtract the smaller total from the larger total, and the resulting amount is your net worth on the day you made the lists and calculations. It tells you where you are financially on that particular day.

If MINE is larger the NOT MINE, you have more assets than liabilities, and that is excellent. (This comment is an aside, but generally whatever makes you smile is good, right? So take a minute, walk to a mirror, and watch what happens to the corners of your mouth when you say the word, "mine.")

If NOT MINE is larger then MINE, well-that's not so good because you owe more than you own, and you've got some planning and money management work to do. You'll want to take a close look at your family spending patterns, look for areas where you can generate some savings, and develop a plan to reduce debt and increase assets.

In effect, what you've done is put together a family balance sheet. Business owners do balance sheets at regular intervals so they will know where they stand. Why not do the same for your family at some regular interval? It is a good process to go through on a quarterly basis through the year, in conjunction with looking at your investment program, and will help you track both the investment growth and the soundness of your financial footing. If quarterly net worth calculations seem too onerous for you, consider doing at least an annual calculation.

arley