personal wealth health

How Much Are You Worth?

Calculate your net worth by following these steps.

WILLIAM J. LYNOTT

Money: It’s part of our lives from the first day mommy tucks lunch money into our backpacks until we finally shuffle off this mortal coil.

How much of the stuff we manage to earn, how much of it we save, what we do with it — these things help to determine how successful we will be in our financially oriented society.

Money and our ability to manage it determines how comfortably we will live, how well we will be able to care for our families, how well we’ll sleep at night and, yes, how well we will enjoy our golden years. That’s why it’s so important for you to keep up-to-date on the status of your personal wealth.

Here are the four steps necessary for O.D.s to determine personal net worth at any given time (For a sample balance sheet, see the online version of this article at optometricmanagement.com.):

1 List your liquid assets.

Here you will include all assets with specific dollar values. This includes your holdings of stocks, bonds, certificates of deposit, money market accounts and all other cash or cash equivalents.

2 List all other assets.

To round out your total assets, list all assets that do not have a known dollar value. Start with the estimated market value of your home. (I’ll address your mortgage later.)

As with all assets in this class, you need to estimate market value. Be careful: Most people tend to over-estimate the value of non-liquid assets. Conservative estimates best serve accuracy in determining your true net worth.

Add your estimated value of all other non-liquid assets, such as other real estate holdings, automobiles, jewelry, tableware, household furnishings, hobby equipment, antiques, and stamp, coin and other collections and all other assets that you believe have a market value.

Use your best estimate of what each asset would bring if you tried to sell it on the open market. Nostalgic value doesn’t count here. (What would a willing buyer actually pay?)

Next, add your liquid assets and non-liquid assets together to determine your total assets.

3 List all your financial obligations.

Next, list all debts, such as, mortgages, installment loans, unpaid credit card bills, medical and dental bills owed, federal and other income tax owed, real estate taxes owed, utility bills, education loans, all other loans or other debts.

Add all this together to calculate your total liabilities.

4 Calculate.

Now, subtract your total liabilities from your total assets to determine your net worth at the time of your calculations.

How often should you calculate net worth? Once a year is the practical minimum. Others who like to keep a closer finger on things prefer to do it on a semi-annual or quarterly basis.

Why bother with this task at all? When it comes to money, knowledge is power. Knowing precisely where you stand financially is an important part of building a solid financial future. OM

MR. LYNOTT IS A FREELANCE WRITER WHO SPECIALIZES IN BUSINESS MANAGEMENT AS WELL AS PERSONAL AND BUSINESS FINANCE. VISIT WWW.BLYNOTT.COM, OR SEND COMMENTS TO OPTOMETRICMANAGEMENT@GMAIL.COM.