Personal Net Worth Statement: Know Your Worth

Net worth statement is one of the statements that we use in personal finance review. In this article, we will see how this statement looks like.

Sample personal net worth statement

personal net worth statement 1
personal net worth statement 2

The values used in the statement are taken on a specific date only, generally year-end (31 December) but it can be any date. It is a snapshot of your assets and liabilities on that specific day.

Components of net worth statement

Personal net worth statement can be divided into two major parts. The first part is the assets and the second part is the liabilities.

Assets can be further divided into cash and cash equivalents, investment assets, and personal use assets.

1. Cash and cash equivalents are assets that are liquid and can be liquidated at short notice without any significant loss in value.

2. Investment assets are instruments that investors buy and sell for the purposes of generating additional income, on either a short- or long-term basis. It might not be able to be liquidated within a short time without loss in value. This is the main difference between investment assets and cash and cash equivalents.

3. Personal use assets are assets for personal enjoyment and normally would not earn any return.

Liabilities can be divided into current and long term. Current liabilities are debts due in 12 months while long term liabilities are debts with maturity longer than one year.

Net worth is simply total assets minus total liabilities.

Net worth improvement

With the net worth statement, we can check the health of your current financial standing. If your net worth is positive, it is a good sign as it means your assets are more than your liabilities. The opposite is true if your net worth is negative. Nonetheless, even if your net worth is negative, at least you know it is now time to tackle your liabilities.

The main goal is to increase your assets and reduce your liabilities. This is the only way to build wealth. From the net worth statement, we can deploy the assets and try to optimise the asset mix. For example, if you have too much liquid assets (cash and cash equivalents), you can allocate some to investment assets and/or reduce your liabilities.

You can use the template and construct your personal net worth statement. Combining personal net worth statement and cash flow statement (put link) will give you a complete picture of your financial situation. With the information from these two statements, you can devise a plan to improve your financial standing.

How can a financial planner help you?

I will help you to construct your personal net worth statement, making sure you did not miss out any asset and liability. Having said so, I can only rely on the client to provide the accurate information. If you really do not remember an item, I also cannot capture it in the statement.

With the information, I will give recommendations to improve your asset mix. Furthermore, I will also provide advice to tackle your liabilities. Depending on your objectives, I will provide a few suggestions but you are the ultimate decision maker. Even if the plan is perfect, it would not work if you do not implement it. So you should let me know your preferences and select a plan that you would implement wholeheartedly.

If you really cannot follow the plan, do not worry and let me know as soon as possible. I will come up with some alternatives. Nonetheless, if you always fail to adhere to the plan, perhaps the plan needs to be overhauled. I will help you with this.

If you are interested in working with me to improve your finances, just leave your details here. I will reach out to you and see if we would be a good fit for each other.

Disclaimer: This post is for informational purpose only. You should use judgment and conduct due diligence before taking any action or implementing any plan suggested or recommended in this article.

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