As the saying goes: “What gets measured gets done.”
That means that if you want to increase your net worth, you must measure everything that goes into and out of your financial accounts.
A statement of net worth is vital to this process because it helps you track, manage, and understand all the important financial information that goes into your net worth.
Let’s find out how to build a personal net worth statement, why you should do it, and how to do it — the smart way.
What Is a Personal Statement of Net Worth?
A personal net worth statement, also called a personal financial statement, is like a balance sheet that provides your net worth number and “shows the work” behind how that number was reached.
On your net worth statement, your net worth number is calculated by adding up the value of all your assets (i.e., everything you own) and then subtracting the value of your liabilities (i.e., what you owe) from the total.
Learn more about your net worth with our master guide to Tracking Net Worth (And Why It Matters).
Why Do You Need a Statement of Net Worth?
A personal net worth statement gives you a snapshot of your assets and liabilities at a specific point in time.
Here’s why that’s so important:
- Achieve an accurate and holistic view of your financial health: Tracking your net worth over time helps ensure that it’s trending in the right direction. For example, if you have added money to your bank account but also racked up credit card debt, your overall net worth will likely decrease even though your bank statement looks flush.
- Plan for the future: A personal net worth statement shows where your money is. For instance, if your assets aren’t easily accessible (e.g., tied up in real estate properties), you may need to set aside an emergency fund to pay for short-term needs, such as unexpected medical bills.
- Get better access to a loan or line of credit: If you need to borrow money from a financial institution, lenders often demand proof that you have enough assets to cover the loan. A personal net worth statement may also be required by the qualification process when you apply for a scholarship or financial aid.
- Enjoy a higher chance of qualifying for investment opportunities: Investing opportunities, such as real estate syndications and private equity, often have minimum net worth requirements based on SEC regulations. You may need to present documentation of your net worth to access these investment vehicles.
How to Set Up a Statement of Net Worth
Now that you know what a personal net worth statement is and why you should have one, let’s roll up our sleeves and get started on creating one! Here are the key steps to follow:
1. Create a Master Account List
A net worth statement is about gaining visibility into what you own and owe, so the first step is to take inventory, starting with financial accounts. List out all your accounts and how much money you have in each. With this master account list, you’ll know where your money is and how you can access it.
2. List Your Assets
Now it’s time to go beyond accounts. List out every asset you own, such as money in bank accounts, the value of investment accounts, market value of your home and car, business interests, personal property (e.g., jewelry, art), cash value of insurance policies, cryptocurrencies, etc. Then, add up the value of these assets.
Not sure how to capture everything or its ever-changing value? Instead of dealing with an overwhelming spreadsheet, you might consider trying a robust wealth tracker that can store all your information in one place and even automatically update the value of key assets.
3. Denote Your Liabilities
Next, take inventory of what you owe. This can include mortgage, auto loan, student loan, and credit card balances. Add them up to see the outstanding balances.
4. Calculate Your Net Worth
Remember the formula for calculating net worth? Now you have all the information you need to use it! Simply subtract your liabilities (total in step 3) from your assets (total in step 2) to see your current net worth.
Maintaining Your Personal Statement of Net Worth
A net worth statement is a snapshot of your assets and liabilities at one time.
That means it changes from day to day as you earn money, spend money, borrow money, and repay debts. It also fluctuates as the value of your investments (e.g., stock, real estate) goes up or down.
To visualize how your net worth changes over time and how the value of your accounts is trending, you need to update your personal net worth statement regularly. This allows you to develop the visibility and insights you need to maintain and improve your financial health in the long run.
There are a few ways you can manage this process.
First, you can use a spreadsheet program, such as Google Sheet or Excel, to track your assets and liabilities. While this offers ultimate control, the downside is that every time you want to update your statement, you need to go into every account to get the latest numbers and copy them onto your spreadsheet — which is not only cumbersome but can also lead to errors if the data is transferred inaccurately.
Alternatively, you can use money management software like Quicken. These types of applications aren’t designed for the specific purpose of net worth and wealth tracking, so you may not be able to link up all your accounts — meaning your statement of net worth might never be 100% complete or accurate.
But rest assured, there is one more option.
Kubera Offers A Frustration-Free Way To Build and Maintain a Statement of Net Worth
If you’re like us, you probably prefer to spend your time growing your net worth instead of wrestling with outdated spreadsheets or overly complex software.
That’s why we built Kubera — an all-in-one wealth tracker to help you keep the pulse of your net worth at all times.
Here are all the features that help Kubera customers build and maintain accurate statements of net worth:
If you own it, we can track it: Kubera integrates with a huge variety of financial accounts (check out our massive list here) to keep the bulk of your financial information up to date.
In addition, our platform integrates with asset experts (such as Zillow and EstiBot) to keep your dashboard updated with the real-time value of any real estate, vehicles, and web domains.
And the rest, our spreadsheet-like dashboard lets you track the other assets that are important to you — from antiques to baseball cards.
Stocks and crypto? We track ‘em: With our tickers for individual stocks and crypto coins, investors can watch their holdings to make informed buying and selling decisions.
Fiat and crypto, happily ever after: See real-time values of all your holdings, whether they’re USD and EUR or BTC and ETH. You can compare apples with apples thanks to our automatic conversions based on the latest exchange rates.
Enjoy a real-time view of all your accounts: Not only can you view all your accounts and assets from our unified dashboard, our analytical charts give you a deeper view of important information such as asset allocation and, of course, net worth over time.
Get the Most of Your Personal Net Worth Statement with Kubera
To serve its intended purposes, your statement of net worth must be correct, comprehensive, and up-to-date — whether it’s for your own tracking, to obtain a loan, to become qualified for an investment opportunity, or to serve as legal documentation.
Kubera can take the stress, frustration, and grunt work out of maintaining your net worth statement and always knowing that all-important net worth number.
See for yourself by starting your free trial or affordable subscription today.
Or if you’d rather, you can even work with Kubera through your trusted financial advisor! Just tell them to check out our white-label option that they can easily roll out to you and all their other clients to provide a cutting-edge experience.