Believe it or not, doing a net worth statement each year is crucial for your financial health. Many people get intimidated by the idea of determining their net worth because they don’t want to see negative results – that they may owe more than they own, or are not as far along financially as they hoped. Well, I don’t want to get on the scale either, but it does not change how much I weigh just because I choose not to look at it. The same applies to money, you are where you are whether you write it down or not. If you want to move ahead financially, a big step is to know where you are now and then use that information to create strategies to get to where you want to be.
Determining your net worth is as easy as writing down the value of everything you own and subtracting from that amount everything you owe (Assets – Debts = Net Worth). You can find a free form for this at http://extension.missouri.edu/wfes
Net worth reviews are a great tool to help you compare how you are doing from year to year. By creating it at the same time each year, you can make sure you are headed in the right direction – that you own a little more and owe a little less than the year before. If you find that your debt is growing and your savings is shrinking, it gives you a chance to stop in your tracks before you get too far down that road, and figure out how to turn it around – such as spending less and saving more.
So how can you get yourself to do it? Make a date with yourself each year around the same time and put it on your calendar. Whether it is the beginning of each year or tax time, etc., whatever makes sense for you. As your reward, you will find yourself reaching, or moving closer to reaching your financial goals!