How To Make A Personal Statement Of Assets And Liabilities To Calculate Your Net Worth

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One of the best ways to see how financially healthy you are is to calculate your net worth. You do this by preparing a personal statement of assets and liabilities.

This means determining the value of everything you own, getting the amount of all your debts and then computing the difference between the two.

In mathematical terms, your net worth is simply your assets minus your liabilities.

Before we go into detail on how to build a personal balance sheet, let us first discuss why it is important to know and monitor this value. There are several advantages and reasons why we should regularly take time and calculate our net worth.

Benefits of knowing your net worth:

  • It serves as a reference point on your financial road map. It tells you how far or how near you are to financial freedom.
  • It helps you review all your accounts. There may be investments that you need to check up on and debts that you’ve been ignoring. Furthermore, becoming aware of your most valuable assets encourages you to take measures to protect them.
  • By listing down all your debts and liabilities, you can allocate your budget more efficiently. You can determine which debts must be paid first and what liabilities you can possibly eliminate.
  • By monitoring the value of your net worth regularly, you’ll have a realistic view of your financial progress. Every time your net worth goes up, you’ll feel great about yourself and be inspired to continue saving money and investing. If it goes down, it will challenge and motivate you to do better.
  • Lastly, by knowing your overall financial status, you’ll have a good grasp of how much risk you can tolerate when buying investments.

How to calculate your net worth

Ready to make your personal balance sheet? Here’s what you do: Grab a pen and some paper and start jotting down your assets. With each item, write down its corresponding current value. Here’s a short list of assets you might have:

  • Cash on hand and in the bank
  • Current market value of properties such as real estate, vehicles and jewelries
  • Receivables such as money your clients and friends owe you
  • Current market value of investments such as stocks, bonds and time deposits

Next, list down all your liabilities. Some of the items you should include are:

  • Credit card debts
  • Amount that still needs to be settled in your housing, auto or salary loans
  • Insurance debts
  • Other payables such as money that you owe from friends

After this, simply subtract the sum of your liabilities from the total value of your assets to get your net worth.

How can I tell if my net worth is good or bad?

In general, your net worth should be positive and initially, that is what’s important. Don’t fret if it comes up negative, it only means that you have a chance to make a lot of positive changes in your life in the coming months.

Remember that when it comes to net worth, the raw value doesn’t really matter as long as it’s positive. What is more essential and what you should actually focus on is increasing that value over time.

How often should I compute my net worth?

As often as you want to as long as you do. I calculate mine every two months and whenever I need to make a major financial decision. If you have investments and properties that fluctuate in value often, it’s best that you do it frequently.

Furthermore, whenever you do this, always check how liquid your assets are. This means calculating how much money is readily available to you. It’s important that you have enough cash on hand to prevent liquidation of your properties and investments at lower market value during financial emergencies.

How do I improve my net worth?

By acquiring more assets. This means being frugal to save money, setting up multiple streams of income and investing in profitable ventures. Furthermore, you should lessen your liabilities by paying bad debts, controlling your expenses and finding ways to convert your liabilities into assets.

Lastly, don’t miss other posts like this by subscribing to Ready To Be Rich.

Photo courtesy of boboniaa


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23 Responses to “How To Make A Personal Statement Of Assets And Liabilities To Calculate Your Net Worth”

  1. Zernan says:

    Thanks for the free tool. BTW can you post a downloadable magsimula ka video or mp3. Thanks…


  2. […] want to attract – currently, I’m aspiring to earn $10 a day from Google Adsense and raise my net worth to P500,000 – among other personal aspirations. You’d probably notice that they’re […]

  3. […] about personal finance gap analysis? It’s basically the same. Know where you currently are by calculating your net worth. If your goal is to become a millionaire, then gap analysis can help you see how far you are from […]

  4. […] financial documents such as your Personal Statement of Assets and Liabilities and Monthly Budget […]

  5. […] you might be interested to read my previous article on how to calculate your net worth by making a personal statement of your assets and liabilities. Doing this will help you practice […]

  6. trevor stroud says:

    trying to understand a balance sheet.if assets are less than liabilities how do you make it balance,do you end up with a negative worth to make it balance

  7. Fitz says:

    Hi Trevor, you can check out my post on Basic Accounting Terms to help you with that question. Thanks.

  8. […] means ample protection of your rights as the owner of the business, as well security of your personal assets, but without drowning in too much paperwork and legal […]

  9. […] take stock and analyze your current finances […]

  10. I want to invite you to talk to my 4th year Economics students at La Salle Green Hills. How can I rich you?

  11. Fitz says:

    Hi estelita, you can contact me through my contact form. Just look for the Send Me An Email link at the sidebar. Thanks.

  12. abigail says:

    through this information, it helps me a lot of how i can do my project! a student financial report!
    thanks a lot ! =)

  13. Alden says:

    Hi there Fitz, it’s kinda late response but can you post your Net Worth Calc template again, better yet, send it to my email. I downloaded your template and it shows a blank page. There are lots of available templates out there but I prefer the one you made. TY!

  14. […] ON EQUITY Buying a property increases your net worth. And when the price of that property increases, then your net worth also increases. This is more […]

  15. Wonder says:

    I’m just wondering if salary would be listed under asset liabilities statement as well? Thank you very much.

  16. […] To help you compute your net worth, you can read this post: How To Make A Personal Statement Of Assets And Liabilities To Calculate Your Net Worth […]

  17. […] should have a positive net worth. Assets refer to the present cash value of all your properties, investments and cash. Meanwhile, […]

  18. […] though you paid more interest fees, your net worth in Plan C would be P486.83 higher than in Plan A after 5 months. (Can you see how I got to that […]

  19. […] Calculate your net worth at least once a year to check if you’re becoming poorer or richer over time. […]

  20. […] inventory. List down your assets and their values, know exactly how much your liabilities are, and recalculate your net worth. My hope is that it’s higher than last year. If not, then plan on how to increase your assets […]

  21. […] down your assets and their values, know exactly how much your liabilities are, and recalculate your net worth. My hope is that it’s higher than last year. If not, then plan on how to increase your assets […]

  22. linmaven says:

    Thanks for this, Sir Fritz! I hope more Pinoys get the value of calculating their net worth as a monitor towards their financial freedom. I compute for mine every month and post it on my blog.

    People will surely learn a lot on how to start from this post! 🙂

  23. […] Further reading: How To Make A Personal Statement Of Assets And Liabilities To Calculate Your Net Worth […]

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