Your Net Worth Statement
Create a clear current financial picture of yourself
In other words, you need to know what your net worth is!
Have you ever taken a family trip where not long after getting in the car the kids started crying, “Are we there yet?” or “How much longer?” or “I’m bored”? I think we all have. Yet on the way home the trip seemed a lot faster and yet it was the same distance. Isn’t it weird how perception makes a huge difference to the overall picture?
Your overall financial picture is the same. Who was it that quipped, “They say the first million is the hardest to make, so I will start on the second first!” But seriously, the most important step is the first one, taking action. The action you need to take is finding the starting line — where are you financially right now? This is called a Personal Net-Worth statement, and it is amazing how many people do not know where they are financially.
Accountants would tell you to add up all of your assets, subtract your liabilities, and voila’ you have your net worth. Unfortunately this number can be positive or negative. Investors use this number to decide if they would invest in a particular company or not. They check to see if the company would go into receivership would there be any money left over if the company sold everything they own and paid of all of their debts? Naturally, any money left over would technically go to the shareholders.
You and if you have any family who you are responsible are shareholders in the company called – YOU. Consequently knowing your net worth is essential. More importantly we need to make sure that it is always positive.
This is not a once and done exercise. You financial landscape is always changing and should be looked at yearly.
What is a reasonable net worth to have compared to the average person in North America?
|
Age |
Salary saved |
Should have |
Average |
|
30 |
½ |
$ 76,300 |
$ 13,900 |
|
40 |
2 |
$ 426,200 |
$ 91,300 |
|
50 |
4 |
$ 833,200 |
$ 168,600 |
|
60 |
6 |
$ 1,175,900 |
$ 212,500 |
|
Retirement |
10 |
$ 1,217,700 |
$ 266,400 |
Remember you are adding up the total value of your assets and subtracting all of your debts.
This will only take a few minutes, but they will be a couple of the most important minutes you will spend.
- Make a list of everything you own and a close approximation of what you could realistically sell it for if you had to? If push comes to shove and a major recession hits or your income dries up for a period, you have some options.
|
Asset Items |
Value (to someone else not you) |
Income |
|
Savings |
$ 950 |
|
|
Investments |
$ xxx |
|
|
Computer |
$ 300 |
|
|
DSLR camera |
$ 500 |
|
|
Clothes |
$ 250 |
|
|
Car |
$ 10,000 |
|
|
House |
$ XXXX |
|
|
And so on … yes it is important to list as much as you can. |
|
|
|
Main job Secondary income (or partner) |
|
$ 65,000 – $ 5416 per month $ 30,000 – $ 2,500 per month |
|
Total |
$ xxx,xxx |
$ XXXX $ x,xxx |
- Make a list of everything that you owe.
|
Liability Items |
Amount owing |
Monthly payment |
|
List outstanding bills individually (anything over 30 days — cell phone, utilities, rent, etc.) |
$ xxx |
Minimum payment required |
|
List all credit cards and interest they charge individually (visa, MC, stores, gas, etc.)
Visa 20% MC 11% |
$ 10,000 $ 3,000 |
Minimum payment required |
|
Leases and their interest rate Car 3% Rent |
|
$ 300 per month $ XXX |
|
List a loans with their interest percentage Mom and Dad 0% Student loan 5% Car loan 3% Mortgage 3% |
$ 1,000 $ 10,000 $150 $ 450,000 |
Minimum payment required
$ 800 per month |
|
Total |
$ xxxx,xxx |
$ xxxx |
- Net worth and Net Income
|
Assets – Liabilities = net worth |
$ xxxxx |
|
|
Montly Income – monthly payments |
|
$ xxxxx |
Now we know where you stand financially, regardless of the numbers, this is a good thing. If you need to go to a bank to get a mortgage or loan, you would require this information. More importantly, it gives you the starting point of your financial journey.
This will only take a few minutes, but they will be a couple of the most important minutes you will spend.
If you would like to learn more click here
Click below for the Ontario Securities NET Worth Calculator
