If you spend any time reading financial magazines, there is an uneasy sense that you are falling behind. The world often gives us a warped measuring stick. No matter how hard we try, we just can’t seem to measure up. Out in the world, our eyes are always wandering to compare our situation to someone else. I’ve read lots of articles about the value of a net worth statement, but none has ever touched on the most important point. By assembling your net worth statement, you begin comparing yourself to the right thing …………….yourself!
When you develop a net worth statement every year, you begin to understand what is happening in your own financial life. Over time, you will begin to understand the wisdom of comparing your net worth year after year. You become intimately familiar with your own personal financial situation. You will witness the ebbs and flows of your life and you will mark milestones together. Goals can develop through this process, and ultimately you gain confidence and peace in knowing where you are headed.
The process is simple. What you own(assets) minus what you owe(debts) = Net worth. Is your net worth positive? Has your net worth improved since last year? Why? What categories have grown, and which have gotten smaller? How has investment performance or debt impacted your net worth? How can you improve your outcome next year? Which assets can produce income, which cannot?
- The best time to do this is in January when you get all your year-end statements.
- Do this once per year. It loses some effectiveness if you do it more often.
- Make sure to keep prior year statements for review
- The net worth statement is a good document to include other estate type information like online account usernames and passwords, Life insurance policy numbers, ect…
My genuine hope is for you to undertake this project with great expectations. I promise it will bring good things to your finances and will become something you look forward to doing each year. My work at Compass Financial Services centers on bringing clarity and confidence to your financial life. I invite you to experience the difference of working with a firm that is committed to listening and offering a safe place to explore your finances. If you find yourself struggling through this process, or have any other financial needs please give me a call.
Guy Leman CFP®
Securities offered through LPL Financial, Member FINRA/SIPC