As the saying goes: “What gets measured gets managed.”
That means that if you want to manage your finances in a way that helps you meet your goals, 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 monitor, manage, and overall understand all the important financial information that goes into creating your net worth.
Let’s find out what a net worth statement entails, why you need one, and how to build and maintain your own — the smart way.
What Is a Statement of Net Worth?
A statement of net worth is a helpful way to check your personal financial health at the end of the year, at the beginning of a new one, between quarters, or even after a “change-of-life” event like marriage, changing jobs, and so on.
A statement of net worth looks like a balance sheet that provides your net worth number and “shows the work” behind how that number was reached. Tracking net worth is one of the best ways to keep your finger on the pulse of your financial health. This is what makes a personal net worth statement one of the most powerful financial documents you can create and manage without the help of a financial professional — as long as you know which processes, financial elements, and tools to use. And we’ll help you figure out all of that, right after we talk about the reasons why this documentation is so very important.
Why Do You Need a Net Worth Statement?
A personal net worth statement gives you a snapshot of your assets, liabilities, and the net worth they come together to influence.
Here’s why that’s so important:
Achieve an Accurate and Holistic View of Your Financial Health
Even if your bank statement looks flush, that doesn’t necessarily mean you’re successfully growing your actual net worth.
For example, if you’ve added money to your bank account but have also racked up credit card debt, you’ve probably decreased your total net worth.
Most people have at least a few different financial accounts, investments in different assets, and various liabilities. Without a singular statement of net worth showing you how all of these are balancing each other out and impacting your net worth, it can be pretty hard to understand when you should be saving, when you should be spending, and how your overall financial health is fairing.
Make Sure Your Financial Health Is Trending in the Right Direction
Measuring your net worth over time helps you create benchmarks. You can use these benchmarks to ensure your finances are getting healthier and healthier every year. Or, if they aren’t, to set realistic financial goals to turn things around.
Better Financial Planning for Now and in the Future
A personal net worth statement shows all of your financial elements, even those smaller accounts and older investments you’ve all but forgotten about. Having a view of all of these assets and liabilities is vital in creating accurate and achievable financial plans both today and ten years from now.
For instance, a net worth statement might bring to light that not nearly enough of your assets are easily accessible — such as if they’re tied up in real estate investments. That’ll tell you that you need to create a plan to save up for a more liquid emergency fund to cover short-term needs, such as unexpected medical bills.
In addition, having a better understanding of your financial picture also gives you more information when it comes to quickly estimating the value of your home and possessions. This is handy when doing something like purchasing homeowner’s and other types of insurance.
And if you’re looking toward the future and planning for retirement, your current assets and their performance over time can be very helpful in projecting future values. Having this information now can inform savings goals that get you where you need to be by the time you stop working.
Get Access to Loans and Investment Opportunities
If you need to borrow money from a financial institution for a large purchase like a home or a vehicle, 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.
In addition, investing opportunities, such as those in the real estate syndications and private equity spaces, 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.
Having a statement of net worth already prepared can help you move quickly and take the stress out of these situations.
What a Net Worth Statement Should Include
The hardest part of creating an effective net worth statement is the upfront work of making sure everything is accounted for.
And we mean everything.
So we’ll make it a little easier with these lists that’ll get you thinking of all the elements that need to go into creating your statement of net worth.
Total Assets: What You Own
Your total assets may include:
- Checking accounts
- Savings accounts
- Investments (stocks, bonds, etc.)
- Real estate
- personal property (jewelry, art, gold, etc.)
- business equity
- Market value of your home and car
- Cash value of life insurance and other insurance policies
Total Liabilities: What you Owe
Total liabilities should account for things like:
- Unpaid bills
- Credit card debt
- Lines of credit
- Any loans (scholarly, personal, real estate, vehicle, etc.)
- Any ongoing payments (child support, back taxes, etc.)
On your net worth statement, the calculation of your net worth number is actually pretty simple once all the above information is in one place. All you have to do is add up the value of your total assets (i.e., everything you own) and then subtract the value of your total liabilities (i.e., what you owe) to get your net worth number.
How to Set Up a Statement of Net Worth
Now that you know what a personal net worth statement is, why you should have one, and what it should include, let’s roll up our sleeves and actually build one from scratch.
Here are the key steps to follow:
1. Create a Master Account List
A net worth statement is all about gaining visibility into what you own and what you 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. You may even want to jot down the access info for these accounts, as long as you’re using a secure resource for these notes (and we’ll recommend such a resource in just a bit!).
When you transfer this master account list over into your statement of net worth, it’ll be easier to keep track of where your accounts are, how they’re performing, and how you can access all of them.
Not sure how to keep up with the ever-changing value of each of these accounts? Instead of dealing with an overwhelming spreadsheet, you might consider trying a robust wealth tracker that can store all your account information and automatically keep the value of each up to date. More on that later.
2. Add Up Your Assets
Now it’s time to go beyond accounts. It’s time to go back to that list you made above and detail every single asset you own. Then, add up the value of these assets for your “total asset” line.
3. Denote Your Liabilities
Next, take inventory of what you owe. Again, these are mostly debts like mortgages, auto loans, student loans, and credit card balances. Add them up to find your “total liability” line.
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 total liabilities (found in step 3) from your total assets (found in step 2) to see your current net worth.
And that’s how you use a statement of net worth to find your net worth at any given time!
But how do you maintain that accurate view of your net worth so it’s always ready when you need it?
How to Maintain Your Personal Net Worth Statement
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 goes up or down.
To visualize how your net worth changes over time and how the value of your assets 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.
Option One: Manage Your Personal Net Worth Statement Manually
First, you can use a spreadsheet program, such as Google Sheets or Excel, to track your assets and liabilities. A Google search will also uncover some pre-made spreadsheets for this purpose, such as this one.
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.
Option Two: Use General Financial Software
Alternatively, you can use money management software like Quicken. These types of applications aren’t designed for the specific purpose of finding your net worth and regularly tracking your wealth, 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.
Option Three: 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 your finger on 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 institutions and account types (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 market value of any real estate, vehicles, and web domains.
And the rest, our spreadsheet-like dashboard lets you add and track the value of other, non-account-based assets that are important to you — from antiques to baseball cards.
With Kubera, fiat and crypto live happily ever after. With our tickers for individual stocks and crypto coins, investors can watch all their holdings right next to each other to make informed buying and selling decisions.
Kubera makes for a great crypto tracker because we natively integrate with popular crypto wallets and exchanges, so you can see real-time values of your holdings side by side, whether they’re BTC and ETH or USD and EUR.
And when it comes to fiat currency, you can compare apples with apples thanks to our automatic currency 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 recap screen gives 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 affordable subscription today.
Or if you’d rather, you can even work with Kubera through your trusted financial professional! Just tell them to check out our white-label option for the modern financial advisor, wealth manager, and beyond. With it, they can easily roll out our solution to you and all their other clients to provide a cutting-edge experience.