Getting Ready to Invest

Assessing Net Worth

To begin evaluating your finances, you'll need to assess your net worth. To determine your net worth, you need to figure out what you own and what you owe. Determining the total amount of your assets and liabilities will enable you to calculate how much you have (or don't have) to invest.

The first step in this process is to determine the total amount of your assets. Assets are your possessions that have value—for example, money in bank accounts, stocks and bonds, personal property, your home, other real estate, etc. Once you've calculated your assets, determine the total amount of your liabilities. Liabilities are financial obligations, or debts. Examples include credit card balances, personal or auto loans and mortgages.

Once you've calculated the total amount of your assets and liabilities, subtract the total amount of liabilities from the total amount of assets. Ideally, you'll want to have a greater amount in assets than liabilities. If your assets are more than your liabilities, you have a "positive" net worth. If your liabilities are greater than your assets, you have a "negative" net worth. If you have a negative net worth, it's probably not the right time to start investing. You should re-evaluate your finances and determine how you can decrease liabilities—for example, by reducing your credit card debt, which is discussed further below. If you have a positive net worth and cash flow, you're probably ready to start an investment plan.

Net Worth Sample Worksheet

Savings Account $ ________________
Checking Account $ ________________
Investments $ ________________
Life Insurance Policy $ ________________
Pension Equity $ ________________
Profit Sharing Equity $ ________________
Employer Savings Plan $ ________________
Retirement Fund $ ________________
Personal Property $ ________________
Real Estate (Including Home) $ ________________
Other $ ________________
  $ ________________
Credit Card Bills $ ________________
Unpaid Medical and Dental Bills $ ________________
Mortgage Balance $ ________________
Home Equity Loans $ ________________
Personal Loans $ ________________
Car Loans $ ________________
Unpaid Taxes $ ________________
Other $ ________________
  $ ________________
Total Assets $ ________________
Total Liabilities $ ________________
Net Worth $ ________________


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    Calculating Cash Flow