Knowing your net worth is valuable not only for purposes of financial planning – it can help you track your progress from year to year and set goals for your family’s financial growth and security; but also for estate planning purposes – especially for letting you know whether you need to engage in estate tax planning.
If you don’t already know your net worth, it’s not hard to determine. All it takes is a little bit of time, a list of your debts and assets, and a calculator.
Step One: Add Up Your Assets
The first step is to list all of your assets. Start with your home and your vehicles, then add bank account balances, CD’s, stocks and bonds, and retirement accounts. Also, be sure to include valuable personal property, like jewelry, antique furniture, artwork, and gun collections. Next to each asset, list its current value. Once you have everything listed, total the values.
Step Two: Calculate Your Liabilities
The next step is to list all of your debts. These include your credit card balances, your mortgage payoff, the payoff for your car loans, and student debt. Don’t forget signature loans and other personal debt. Add up all of your debts, and make a note of the grand total.
Step Three: Do The Math
Finally, subtract the total of your liabilities from the total value of your assets. This number is your approximate net worth.
You’ll want to repeat this process on an annual basis, to keep tabs on your financial picture. And hopefully, to watch your net worth grow!
Stephen A. Mendel, Estate Planning Attorney
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