Net Worth: Your financial snapshot

Net Worth: Your financial snapshot

Your financial snapshot

Unlike the board game Monopoly, we don't all begin our wealth building sitting at start with $1,500 from the bank and no debt.

As you begin the process of developing a retirement preparation strategy, finding your starting point is a key step.

Net worth provides a snapshot of your current financial situation. When calculated periodically, your net worth can be viewed as a financial report card that allows you to evaluate your current financial health and may help you figure out what you need to do in order to reach your financial goals.

Calculating net worth is a simple formula of subtraction your debts from your assets. Collecting the data to create your assets and debts can take a little more effort.

An asset is anything that you own, whether tangible or intangible, that can be traded for cash value (or is already cash). Examples of an asset are:

  • Personal property (Current market value of your home, rental properties, boats, collectables, vehicles, etc.)
  • Cash (checking, savings, certificate of deposit, money market)
  • Investments (Annuities, bonds, life insurance cash value, stocks, treasury bills, etc.)
  • Retirement accounts (401 (k), Roth IRA, SEP plans, SIMPLE IRA, etc.)

A debt is an obligation that you owe to another person or entity. Examples of debt are:

  • Mortgage/Home equity loan/Second mortgage
  • Credit card
  • Medical bills
  • Student loans
  • Lines of credit
  • Personal loans
  • Taxes

Your net worth will likely change over the course of your life.  People just starting their careers, especially with college loan debts, may have a negative net worth.

As you have time to build equity in a home, get increases in your salary and invest those raises in retirement accounts, your net worth may increase. A 2013 survey by the Federal Reserve Board shows that people with a head of household between the ages of 65-74 had the greatest median net worth among age groups those 18 or older.
Once you have your net worth, the continuing process of budgeting, debt reduction, investing and contributing to your retirement account builds your future net worth.

If you would like someone to help organize a strategy, please contact a OneAmerica financial professional.


5 Steps to Set Financial Goals

Pete the Planner video: Budgeting

Pete the Planner video: Paying off Debt

Provided content is for overview and informational purposes only and is not intended and should not be relied upon as individualized tax, legal, fiduciary, or investment advice.

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