Copyright Goodheart-Willcox Co., Inc. 44 Chapter 2 Personal Financial Planning Net Worth Statement Net worth is the difference between what is owned and what is owed. An asset is an item of value that is owned, such as cash, stocks, bonds, real estate, and personal possessions. A liability is a financial obligation that requires future payment. Liabilities include unpaid bills, credit card charges, mortgages, personal loans, and taxes. Your net worth is the difference between your assets and liabilities. Experts advise evaluating your total financial situation at least annually. A net worth statement can help you do this accurately. A net worth statement is a written record of an individual’s current financial situation. It measures financial standing at a particular point in time. A net worth statement is shown in Figure 2-7. To create a net worth statement, list all of your assets and liabilities. Assets are divided into two basic categories: • Current assets include cash and savings that can be converted to cash quickly and easily. These are also called liquid assets. Liquidity is the ease with which an asset can be converted into cash without losing value. Income and Expense Log Date Item Income Expenses 9/10 Bus fare (round trip) $4.00 Lunch $5.15 Snack $2.05 9/11 Babysitting $20.00 Snack $3.50 School supplies $17.00 Movie ticket $7.00 9/12 Birthday gift $25.00 New tennis shoes $85.00 Goodheart-Willcox Publisher Figure 2-6 Keeping a detailed log of your income and spending will help you develop a more accurate and realistic budget. Goodheart-Willcox Publisher Figure 2-7 A net worth statement is a written record of an individual’s current financial situation. Net Worth Statement Courtney Acorinti December 31, 20-- Assets Liabilities Current Assets (bank account, savings account, college fund) $9,200 Current Liabilities (credit card, medical bills) $1,200 Fixed Assets (auto, personal property) 800 Long-Term Liabilities (auto loan, college loan) 8,000 Total Liabilities $9,200 Net Worth Net Worth (Assets – Liabilities) 1,000 Total Assets $10,000 Total $10,000