What’s your worth?

Whether you’re a newbie to personal finance, or someone who is already well on your way to saving and investing, computing your net worth is a worthwhile exercise. Experts suggest doing it at least once a year most preferably with your spouse (and even with children, but make sure they understand that these are information meant to be kept within the family).

What is that so-called net worth? It is a snapshot of where you are on the road to financial freedom. It has the potential of delighting you, or depressing you, depending on your current state of affairs. But remember that it is just that—a snapshot—and the way it will look a year from now will depend on how determined you are to improve your finances.

It is a very, very personal document, and as these things go, you can either fudge it to make yourself feel better, or populate it only with brutally honest figures. It goes without saying the latter is better!

How to do it? Alijeffty Gonzales’ just-finished Pinoy Financial Planning Guide (he is giving it away for free. Email me for a copy at lightdream (at) gmail (dot) com) has details and examples.

1. List down your assets and liabilities. That basically means what you own and what you owe.
2. Categorize your assets into current assets (stuff you can sell or use in the next three months) and other assets (stuff you won’t or can’t easily sell). Examples of current assets are bank account balances, cash on hand, market value of marketable securities like bonds, stocks and mutual funds. Other assets may include your car, house, furniture and fixtures, the cash value of your insurance policies, interest in a business, jewelry, you get the picture.
3. Group your liabilities likewise. Current liabilities are what you owe within the next three months and recurring payments like credit card bills, loan and mortgage payments. In the “other liabilities” section, list down everything you need to pay three months from now.
4. Deduct your liabilities from your assets, and there you have your estimate of your own net worth.

Through the years, I have found that having everything in black and white helps me keep my feet grounded. When you approach this exercise with an open mind, it allows you also to keep your eyes on that final goal of a happy golden age in retirement, despite all the distractions of the day. But always remember, while this little spreadsheet may feel like it summarizes your life, life is not all about money! It’s so much more than that, as I’m sure you all know

Share This