Pretty simple, right? Then why do people make it so complicated? Good question. I’m not sure. I can go into a few more complexities of it, and I will below (just so you feel like you get your money’s worth, ha).

People actually pay lots of money to have financial planners put their Net Worth Statements together. That’s fine, but it’s not rocket science. I’m going to tell you how to do it quickly and simply on your own, so that it’s useful to you. I’m going to tell you how to use it, why you need to know it, and who might ask for it. Sound good?

Then when you go hire a financial planner, you can compare notes, or tell them that you already track that information on your own. ;-)

How to Put a Net Worth Statement Together

The easiest way to put together a Net Worth Statement is using a spreadsheet. You can use software like Excel, or you can even try open source software (which is free!). Many personal finance softwares like Quickenwill also calculate it for you. If you’re using something like Quicken instead of developing it on your own, you might want to just print reports monthly, quarterly or semi-annually so that you get a static number to use for comparisons.

If you’re using a spreadsheet, you’re going to simply list dates along the top row. I don’t recommend starting out by calculating your net worth monthly. Unless you have a lot of assets and highly fluctuating assets (like a very large stock portfolio), it just isn’t necessary, and can actually be discouraging. That’s not what we’re going for here. For my clients that had a lot of wealth to manage, we put Net Worth Statements together quarterly. I did it every six months for most of my clients, and that will likely serve you just as well.

Now down the far left column, list out all of your assets (everything you own) and all of your liabilities (everything that you owe). Your assets include things like personal property (use your best guess here, if you had to liquidate – sell – your stuff, what would it be worth?), the value of your autos (use a site like Kelly Blue Book to determine the current values), the current value of your home if you own it (you can use a site like Zillow.com or ask a local realtor), all of your IRAs, 401(k)s, profit sharing, bank accounts, any other real estate, cash under the mattress, etc. The point here is to put a value on everything that you own.

Now, remember, you’re making assumptions here. All of financial planning is made up of assumptions. Do your best, don’t get too bogged down in details. Just use a number you feel comfortable using – just don’t over inflate it. ;-)

Next, you’re going to list out your liabilities (everything you owe). This includes your mortgage, credit card debt, loans from your mom or anyone else, you get the idea. Everything that you owe is listed.

Then, simply subtract your liabilities from your assets (see the video above), and the resulting number is your net worth. If someone is a millionaire, that means that her net worth is at least $1,000,000 – not just that she owns a million dollars worth of stuff.

My last tip on putting a Net Worth Statement together, would be to group like items near each other. For example, group all of your retirement assets together (in separate rows, but consecutively), group all of your personal furnishings together (you can list them out separately if you like…jewelry, artwork, household furnishings, etc.) group your cash accounts together, group all of your credit cards, etc. This makes managing your assets much easier as time goes on.

Now the key is to update this statement and analyze it, at least every six months.

Why? Because it tells you how your wealth is (or isn’t) growing. It helps you look at individual accounts to determine if your investments are doing what they should be, if your debt is going down…it’s a barometer for your family’s finances. If your net worth isn’t increasing, you can see that. Then you find out why it isn’t growing, and make changes accordingly.

The first step to becoming financially free is awareness. Your Net Worth Statement brings you awareness of your current financial situation. Do it yourself, or pay someone to do it for you. But do it.

Who else might need to know my net worth?

I mean, why would you want to tell someone what your net worth is, anyway? Typically, if you’re looking into investing, you’ll need to tell the people you’re investing with your net worth. This helps them determine if certain investments are appropriate for you or not. Sometimes you may also need this information when obtaining a loan. As you increase your financial savvy and financial dealings, you’ll find more entities (people/companies/groups) asking for it. You’ll have more money to invest and will be looking for places to do it. You’ll need to know your net worth.

Whew! Okay, that was pretty painless, right? Calculating your net worth is a big step in managing your money. It’s not difficult. I hope this helps you get started. Let me know if you have questions, if this was helpful, if you’ll commit to doing it…;-) As always, I love your feedback. Please leave your comments below.