Monday, February 21, 2011

What Is Your Net Worth?

Know exactly where you stand financially by calculating your net worth.  The formula is simple.

Net Worth = Assets – Liabilities

where Assets are what you own and Liabilities are what you owe. So Net Worth is what’s left over, the true measure of your financial wealth (or the lack of it).

Below is taken from The MoneySense Ultimate Guide to Financial Planning, which is available in bookstores nationwide for just a crazy amount of Php 250.00. Grab a copy now, I highly recommend it.

To get an accurate picture of your net worth,  there are important things to take note of:
  • Short -Term Assets
Or liquid assets are those you can access or dispose of immediately or within one year. Usually, you use them for your daily transactions or short-term savings.

These includes:
Bank deposits – savings, checking and short-term time deposits
Foreign currencies
Money market accounts – treasury bills
Receivables your expecting to be paid in a year
  • Long-Term Assets
These are investments for long-term goals like college education, insurance and retirement.

These includes:
Government securities – RTBs, T-Notes, T-Bonds
Long-term cash and time deposits
Corporate bonds or commercial papers
Investment funds – mutual funds, UITFs, VULs
Cash value of life insurance
Pre-need plans – pension, education, life
Company’s retirement fund – if you’re eligible
Real estate for investment purposes – rental properties, vacant lots
Other investments – equity in your own business, shares in private company stocks
  • Personal Property
These are properties that appreciate in value. You have the option not to list your personal property since you may have no plan to sell the house you live in, the cars you drive and the jewellery you want to pass on to your children. However, it may be useful to list the current market value of your personal properties for worst case scenario i.e. you have to sell everything you own that has significant value.
  • Total Assets
Add up your short-tem, long-term and personal assets to get your total assets.
  • Short-Term Debt
These are loans worth within a year or so.
  • Long-Term Debt
This includes mortgage’s current balance and any loans that still has three or more years to go.
  • Total Liabilities
Add up your short-term and long-term debts to get your total liabilities

Net Worth Worksheet
As of (today's date):
 Category    Institution      Current Value      % of Total Assets   
Short-term Assets
Cash on Hand   
Bank Deposits   
Foreign Currencies   
Money Market Accounts   
Long-term Assets
Government Securities   
Long-term Time Deposits   
Mutual Funds/UITFs   
Cash Value of Life Insurance   
Retirement Fund   
Pension Fund   
Investment Real Estate   
Other Investments   
Personal Assets
Art Work   
Other Personal Property   
Short-term Liabilities   
Credit Card Balances   
Personal Loan   
Long-term Liabilities   
Car Loan   
Other Debts   

No comments: