Net worth is something that, in this day and age – everyone seems to be excited about. Whether it’s a simple cash value or the addition of all your assets, net worth statements are a great way of better understanding the state of your financial situation and how it all comes together.

It also ensures better financial resource management and takes care of your financial wealth in the long run. But – how exactly can you measure your financial data? What is a net worth statement, and how does it apply not only to your financial snapshot but also to your business? What is negative or positive net worth, and should you include your personal property?

If you are wondering about the answers to these questions or something within that vicinity, we have you covered! And we also have some incredible templates for you to use to calculate your net worth better. So, if you want to learn more about it, do not change the channel, and let’s dive into some specifics!

But first, let’s talk about the kind of software we will use to create a satisfying net worth statement. In case such important and math-oriented like this one, we cannot recommend anything other than Microsoft Office.

It is one of the most reliable and utilized software in the world, with millions worldwide using it daily in their work. You can easily use many of the tools this software provides with no issues whatsoever, and – if you want to send it out, it’s really easy to open on any computer of your choosing. And it’s also a great package of not only Excel or Word that you can use for your net worth statement but a whole package of advanced office-related programs.

And – it is not an expensive piece of software anymore. Thanks to the hard work of many online resellers, you can easily get Microsoft Office for an affordable price. With that in mind, let’s review some templates that can help you in your net worth statement assessment.

First, we have a pretty good net worth statement template for your personal use, but it can also work greatly business-wise. In this case, you can estimate your net worth annually with adding your bank accounts balances, some real estate loan, maybe investment accounts you have made in your lifetime and get it all in a dollar value at the end. It’s pretty easy to use and advanced enough that most people are capable of utilizing it to their needs.

Download this template for free at SpeadSheet123.com.

Next, we have something more for a personal use, where you can estimate financial status learn how to make some financial progress in the future. In this one, you will also get some pretty good representation of the up to date amounts of cash you have, your debts, investments, retirement savings etc.

If you need something that will help you calculate your financial statements – it’s a great financial tool. For business – it may be a tad bit simplistic.

Download this template at the official Microsoft website.

And finally, we have what the business-oriented people like the most – the black and white spreadsheet with only numbers. Whether it’s your income statement or mutual funds – the cash flow will be available here for you to see.

It is one of the most advanced tools to calculate the net worth and you can see just how much of a hassle it is to create a balance sheet that will suffice for the business needs. Well, in this case- it’s an easy task to do, so if you need something more advanced – this template is definitely for you.

Download it for free at FiveMinuteClasses.com.

So, now that we know all the key milestones to round up a person's net worth, let’s go over the topic at hand – the net worth itself. What is it exactly? The official definition would be the value of all the assets in the company or personal finances minus all the liabilities.

What is it used for?

The main idea of gauging net worth is not to put it on the Forbes list but rather to create a way of implementing some financial strategies that will later benefit your finances or the company’s finances.

If you have knowledge of your financial well-being, then you can make an informed decision on what to do with your money and how to maximize your financial situation.

So, how do you calculate the net worth?

As stated, it is all about adding all your assets and subtracting your liabilities. An asset can be anything you own, from bank account statements to even an expensive watch. Everything that you have that you can liquify can be considered to be an asset.

And, comparatively, everything you owe is a liability. Those could be loans, business expenses that you must make monthly, or any other obligations that can create an issue for your financial well-being.

The result of net worth can be positive or negative. If you have a negative net worth, it does not mean that you are broke; it just means that the whole amount of your liabilities outstands your assets. It can happen if you have a few mortgages or huge loans you took in order to start a business.

On the other hand, there is decreasing and increasing net worth. If you have a decreasing net worth, you will most likely have a problem with some liquidity, and you should take some action in order to change this situation.

Business Net Worth

So, what is business net worth, then?

Well, it’s a balance sheet. It shows the company's value by adding together all the assets and liabilities. If the liabilities exceed assets, the company’s financial health is not in the best place.

It can also influence the overall business’s health as the potential banks or other lenders may not be enthusiastic about lending money to such companies.

Of course, the worst thing, in that case, is decreasing net worth because it can be a real issue for the company. Having a lot of loans may mean that the company is growing, but having decreasing value suggests that the company is suffering.

Personal Net Worth

Next up, we have the personal net worth. We have described it before in this article, so just to summarize – if you want to calculate your net worth as a person, just start adding all the assets you have and subtracting liabilities. Remember to include all the outstanding balances like credit card balances or car loans that can influence your net worth the most.

You should also add all your real properties, your car value, some stocks if you have those, and all the other potential assets that can cross your mind. Even something as ordinary as a watch in our previous example. Remember to take the current market value of all your assets, not the price you have paid for it. Then, it will show the balance owed to the company.

Negative net worth is, as we have shown before, the total amount of assets you have when the liabilities are bigger than those assets. It can mean that the mortgage payments are higher than the income, maybe the total amount of credit card bills, some car payments you need to have, and even student loans that create a greater cash negative outcome.

The best way to mitigate these costs is to reduce the amount of debt the person or family is having. There are a couple of ways that you can go about it.

Renegotiate the Terms

For example, if you have a lot of credit card debt, try renegotiating the terms with your credit card providers. You can offer them higher interest rates for a longer period of time and lower your monthly payment. You can also sell some of your assets to pay for a debt you owe a certain company, like a student loan or a car payment.

Debt is not something uncommon in this day and age as most people practically start with some severe amount of debt when they enter college, for example, and need to loan a great amount of money in order even to start thinking about entering the University of their choosing.

File for Bankruptcy

You can also try and file for bankruptcy protection if you would like to implement some debt reduction in your finances. However, remember that is not an optimal solution. You cannot do it every time you get into debt, as, depending on where you live, it is a one-time only kind of get out of jail free card.

Additionally, you need to remember that it does not mean you have no debt, and now you can stop paying for any potential debt you owe. For example, if you have some family court-related liabilities like alimony, child support, or other related to the government like taxes and even some student loans – you cannot be just let go from all of those.

Additionally, you will have some serious issues in acquiring some assets in the future as your credit score will not be super high, to put it lightly. If you would like to take some additional loans – the credit institutions may be a little hesitant to grant you that.

So, what is good net worth these days? As with all things in life – it depends. Mostly on where you live, as it will be completely different for European Union, Central Asia, the Middle East, and North America.

Sticking to the USA example, the average net worth in 2019 was 121,700 dollars.

Is it a big amount of money?

Well, it’s not small. But it is not the fact that all Americans have over 100,000 dollars saved. It means that they have homes and cars, and a lot of this average is being pumped by the billionaires who reside in the US.

So, the total assets you have, even those in the retirement accounts and total liabilities you have gathered in your lifetime, can influence the total value. Some say that you should have four times your annual income of net worth saved by the time you are 40. Some – that you should not look at the total debt but rather the essential elements that can influence your credit score.

In the end, the best net worth is the one you feel comfortable with, according to your lifestyle and financial potential in the future.

And here we are, at the end of our road. Thank you so much for checking out our article on all the net worth statement information. As you can see, it is not an easy task to pinpoint exactly what your net worth is or what it should be.

The most important element to consider is if the net worth you have is increasing or decreasing in the end. As we have stated multiple times throughout the article – having debt is essentially a normal thing if you are a person living in the 21st century. The issue comes up when there is no way of gaining some additional income that would be higher than your expenses.

If you are getting a mortgage for 500,000 dollars, it does not mean that you don’t have that money, it means that you have made an investment that can grow in time rather than decrease. So keep that in mind when thinking about all the debt you have.

If you want to learn more about many other office-related articles – be sure to check out other articles on our site. That’s it for today. We will see you in the next one!