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Oscar Dominguez: Take a personal inventory to determine net worth

Posted: June 26, 2009 9:42 p.m.
Updated: June 27, 2009 4:55 a.m.
 

In this challenging economic environment, consider taking inventory of your finances by first determining your net worth - the difference between your total assets and total liabilities.

Your net worth will provide a window into your current financial situation and serve as a good starting point for setting your financial goals. It can also serve as a reference point to measure your progress annually.

To calculate your net worth, first list the current value of your assets in one column. These include: cash on hand; money in checking, savings, certificates of deposit, money market, retirement and brokerage accounts; stocks, bonds and mutual funds; the cash value of your life insurance; your vested equity in pension and profit-sharing plans; annuities; money owed to you from existing loans; and any additional investments.

Second, list the market value of any real estate you own in the assets column.

To determine market value - the price your property would currently obtain on the open market - research property prices in your neighborhood with special focus on recent sales of properties that were not in distress.

Third, list personal property such as vehicles, jewelry, equipment, furniture, collectibles and other valuables.

Once you have listed these assets, add the values to obtain your total assets.

Next, create a new column to list your liabilities. These include: balances owed on your mortgage, auto, student, home equity and any other outstanding loans; credit card debt; and any outstanding bills, credit lines or money you owe. Add the numbers to obtain a grand total for your liabilities.

Once your assets and liabilities are determined, subtract the total liabilities from the total assets to obtain your estimated net worth.

Consider these tips when determining your net worth:

n Be honest: Don't hesitate to take a hard look at the value of your assets. When listing assets such as real estate, keep in mind costs such as taxes and the associated transaction fees that accompany the sale of property.

If you are uncertain about the value of personal property such as jewelry, antiques or collections, consider having the items appraised by a professional appraiser.

n Set goals: Your net worth calculation can be a good starting point from which you can create financial goals and consistently track your progress.

If you have a negative net worth, consider creating a budget with a goal of paying down debt and ultimately increasing your savings.

Determining your net worth can provide valuable information about the current state of your finances and enable you to plan wisely for the future. Consider making it a goal to check your net worth at least once a year to gauge your progress.

Oscar Dominguez is vice president and branch manager of the Stevenson Ranch branch of Union Bank and the Valencia Bank & Trust branch. His column reflects his own views and not necessarily those of The Signal.

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