One of the age old saying is still true today “all that glitters is not gold”. In a society where we judge people by where they live, what car they drive and what name brand label is on their clothes helps to further camouflage the truth behind people finances. So many people get caught up in the game of trying to keep up with Jone’s when in actuality the Jone’s are up to their neck in debt but must keep up the image everyone aspects of them. Laying a good financial foundation of living beneath your means and saving up for a rainy day is still good sound advice.
A person’s personal net worth gives you a barometer reading of how solid of a financial foundation they are really standing on. If there are cracks in the foundation it will be apparent as we go through the following exercise. Consider the following formula total assets minus total liabilities equal net worth. Here is a breakdown of how to correctly compute one’s net worth. First add up the current value of each of the following accounts.
Assets (Cash and Cash Equivalents)
Checking accounts
Saving accounts
Money market accounts
Saving Bonds
CD’s
Cash Value of life insurance

Invested Assets
Taxable brokerage accounts
IRA
ROTH IRA
401(k) or 403(b)
SEP-IRA
Keogh or other qualified plan
Pension (vested benefit)
Annuity (accumulated value)
Business ownership Interest
Real estate (rental property or land)
Sole proprietorship
Partnership
C Corporation
S Corporation
Limited liability Company
Use Assets
Principle home
Vacation home
Cars, truck, boat
Home furnishings
Art, antiques, coins, collectibles
Jewelry, Furs
Now you can tabulate all of these total assets to one final number. Next we must look at the one liabilities to help up ascertain the final number that will be deducted from the total assets. Here is a breakdown of liabilities and we must add up the current amount due for each one.
Liabilities
Current
Credit card balances
Estimated income tax owed
Other outstanding bills
Long-term
Home mortgage
Home equity loan
Mortgage on rental properties
Car loans
Student loans
Life insurance policy loans
Other long-term debt
Now let’s take the final number for liabilities and subtract it from the final number of total assets. The remaining number will show you the actual net worth for the individual. Example
Total Assets equal to $104,000
–
Total Liabilities equal to $84,000
_____________________________
Net Worth equal to $20,000
A person’s net worth will let you know if they are truly standing on a firm financial foundation.