assembling-a-net-worth-statement — comprehensive planning process

A net worth statement captures your complete financial position at a specific point in time. By subtracting total liabilities from total assets, you arrive at a single number representing accumulated wealth. Tracking this figure quarterly reveals whether your financial decisions are moving you forward or backward.

Asset Categories

Assets divide into four primary categories based on liquidity and purpose.

Liquid Assets

Liquid assets convert to cash within days without significant loss of value.

Common liquid assets:

Checking accounts
Savings accounts
Money market accounts
Certificates of deposit (CDs)
Treasury bills
Cash value of Series I or EE savings bonds

Valuation: Use current account balances. For CDs, use current value including accrued interest.

Retirement Assets

Retirement accounts receive special tax treatment and typically carry early withdrawal penalties before age 59½.

Tax-deferred accounts:

401(k) and 403(b) plans
Traditional IRA
SEP-IRA and SIMPLE IRA
Pension present value
Deferred compensation plans

Tax-free accounts:

Roth 401(k)
Roth IRA

Valuation: Use current account balances. For pensions, request a present value calculation from your plan administrator or estimate using the annual benefit multiplied by 12-15 years.

Real Estate

Real estate represents the largest asset for most households.

Real estate holdings:

Primary residence
Vacation property
Rental properties
Land

Valuation: Use recent comparable sales, current Zillow/Redfin estimates, or professional appraisals. Update valuations annually. Do not include furnishings or personal property in real estate values.

Business Equity and Other Assets

Business interests:

Sole proprietorship equity
Partnership interests
LLC membership interests
Stock in closely-held corporations

Valuation: Business valuation requires professional assessment for accuracy. For net worth tracking purposes, use book value (assets minus liabilities on the business balance sheet) or a multiple of annual earnings (typically 2-5x depending on industry).

Other assets:

Brokerage accounts (taxable investment accounts)
529 education savings accounts
Health Savings Accounts (HSAs)
Vehicles (current market value)
Valuable collections (art, jewelry, coins) with documented appraisals

Liability Categories

Liabilities represent obligations to repay borrowed funds.

Mortgage Debt

Include:

Primary residence mortgage balance
Home equity loan balance
Home equity line of credit (HELOC) balance
Investment property mortgages

Valuation: Use current principal balance from most recent statement, not original loan amount.

Student Loans

Federal loans:

Direct Subsidized and Unsubsidized Loans
PLUS Loans
Consolidated federal loans

Private loans:

Bank or credit union student loans
Refinanced student loans

Valuation: Sum all outstanding principal balances. Include accrued interest if capitalized.

Consumer Debt

Credit cards:

List each card with current balance
Include store credit cards and lines of credit

Auto loans:

Current principal balance on vehicle financing
Include leases if buyout is planned

Personal loans:

Unsecured personal loans
401(k) loans (owed to yourself but reduces available retirement assets)
Family loans with repayment obligations

Other Liabilities

Additional obligations:

Medical debt
Legal judgments
Tax liens or back taxes owed
Margin loans on investment accounts

Worked Example: Complete Net Worth Statement

Household: Married couple, ages 45 and 43, two children

Assets

Category	Item	Value
Liquid Assets
	Joint checking	$8,500
	Joint savings	$35,000
	Money market	$12,000
	Liquid Subtotal	$55,500
Retirement Assets
	Spouse 1 401(k)	$285,000
	Spouse 2 401(k)	$195,000
	Spouse 1 Roth IRA	$45,000
	Spouse 2 Traditional IRA	$32,000
	Retirement Subtotal	$557,000
Real Estate
	Primary residence	$425,000
	Real Estate Subtotal	$425,000
Other Assets
	Taxable brokerage	$78,000
	529 accounts (2 children)	$62,000
	HSA	$18,500
	Vehicles (2)	$38,000
	Other Subtotal	$196,500
TOTAL ASSETS		$1,234,000

Liabilities

Category	Item	Balance
Mortgage Debt
	Primary residence mortgage	$268,000
	HELOC	$15,000
	Mortgage Subtotal	$283,000
Student Loans
	Spouse 1 federal loans	$12,000
	Student Loan Subtotal	$12,000
Consumer Debt
	Auto loan	$18,500
	Credit cards	$6,500
	Consumer Subtotal	$25,000
TOTAL LIABILITIES		$320,000

Net Worth Calculation

Total Assets: $1,234,000 Total Liabilities: $320,000 Net Worth: $914,000

Simplified Example

For a younger household with fewer accounts:

Assets:

Checking/savings: $25,000
401(k): $125,000
Roth IRA: $35,000
Taxable brokerage: $40,000
Home value: $375,000
Vehicles: $28,000
Total Assets: $628,000

Liabilities:

Mortgage: $295,000
Student loans: $42,000
Auto loan: $22,000
Credit cards: $3,500
Total Liabilities: $362,500

Net Worth: $265,500

Net Worth Growth Targets

A positive net worth that grows consistently indicates financial progress. Target growth rates depend on life stage and circumstances.

Annual growth targets:

Accumulation phase (ages 25-50): 8-15% annual growth
Pre-retirement phase (ages 50-60): 5-10% annual growth
Early retirement (ages 60-70): 3-5% annual growth
Later retirement (ages 70+): Flat to slight decline is acceptable

Growth calculation example:

Net worth January 1: $530,000
Net worth December 31: $572,400
Annual growth: $42,400 (8.0%)

Growth comes from three sources:

New savings added during the year
Investment returns on existing assets
Debt paydown reducing liabilities

Target breakdown for 10% growth on $500,000 net worth ($50,000 increase):

New savings contributions: $25,000
Investment returns (6% on $400,000 invested): $24,000
Debt paydown: $8,000
Home appreciation (3%): $9,000
Less: new debt taken on: -$16,000
Net change: $50,000

Review Cadence

Quarterly Updates (15-20 minutes)

Update these values:

All bank account balances
Investment account balances (retirement and taxable)
Loan balances from statements
Credit card balances

Skip quarterly:

Real estate values (update annually)
Vehicle values (update annually)
Business valuations (update annually)

Annual Comprehensive Update (45-60 minutes)

Complete full review:

Request or look up current home value estimate
Update vehicle values using Kelley Blue Book or similar
Request pension present value if applicable
Review and update business equity estimate
Verify all account statements reconcile to your records
Calculate year-over-year growth percentage

Tracking Format

Maintain a spreadsheet with columns for each quarter. This creates a historical record showing:

Which assets grow fastest
Seasonal patterns in spending
Debt paydown progress
Overall trajectory toward goals

Sample tracking structure:

Item	Q1 2025	Q2 2025	Q3 2025	Q4 2025	YoY Change
Total Assets	$850,000	$872,000	$895,000	$920,000	+8.2%
Total Liabilities	$320,000	$312,000	$304,000	$295,000	-7.8%
Net Worth	$530,000	$560,000	$591,000	$625,000	+17.9%

Common Valuation Mistakes

Mistake 1: Including personal property that has no resale value Correction: Exclude furniture, clothing, and electronics unless you have documented collectible value

Mistake 2: Using purchase price instead of current value Correction: Vehicles depreciate; investments fluctuate. Use current market values.

Mistake 3: Forgetting liabilities Correction: Include all debts, even small credit card balances or family loans

Mistake 4: Double-counting Correction: 529 accounts owned by you count as your asset. Don't also count them as your child's asset.

Mistake 5: Using home equity instead of home value Correction: List home at full market value in assets; list mortgage in liabilities separately

Assembling a Net Worth Statement