Creating a Net Worth Statement In a previous article, How to create and maintain a budget, I wrote about the importance of a budget and the 4 steps to create one. Today I want to focus at step 2, know where you stand.At the core of step 2 are financial statements; statement of cash flows and net worth statement. Let’s look at the Net Worth Statement first.What is a net worth Statement?A net worth statement or balance sheet is a snapshot of all your assets and liabilities at a given point in time. To get your net worth you simple subtract liabilities(debts) from your assets (personal use property, investments, cash(checking and savings accounts)). How to create your net worth statement?Take a pen and paper, create an excel spreadsheet or use a someone else’s form (here is a good one from Morningstar).Create two columnsAssets on the leftCash and cash alternative (checking and savings accounts)Investments and retirement accountsPersonal use assets (house, boat, car etc)Liabilities or Debts on the rightShort term (1 year or less)Long term liabilities (greater than one year)Add up both columnsAssets – Liabilities = net worthThe Net Worth statement shows how much money you have to meet your short and long term financial goals. What should my net worth be and how do I compare to others like me?Here are some highlights from a US CENSUS Report from 2013 about Wealth and Asset Ownership by Year. https://www.census.gov/data/tables/2013/demo/wealth/wealth-asset-ownership.htmlAge basedLess than 35 6,90035 to 44 45,74045 to 54 100,40465 and Older 202,950The Report also has Net Worth categorized by education, single and married households.CNN provides a calculator to determine median net worth by income and age compared to the nation as a whole. https://money.cnn.com/tools/networth_ageincome/Age Net Worth25 years old $8,52535 $51,57545 $98,35055 $180,12565 $232,000Another way to compare Net Worth is by looking into your Financial Life Cycle Phase. Life Cycle Phases:Asset Accumulation ages 20 – 45 with a net worth ratio from (1:1 - 1:3)Starting a careerStudent Loan DebtGetting marriedHaving a childBuying a houseIt is common for young adults to have a negative net worth during this phase because you are building and investing in yourself and familyConservation and protection ages 45 – 65 (net worth 1:2 - 1:5)Established in careerKids are older maybe out of collegePaying off large debts.. HomeIncrease savings for retirementIn this phase the focus is on saving for retirement and investing in your future.Distribution and Gifting 65 + (net worth ratio 1:5 +)Retirement spendingSocial SecurityHealthcare and MedicareVacation homes and travelWealth transferNo matter what age, phase, education or marital status it is important to get a complete picture of your financial situation in order to determine how you are going to fund your financial goals.Hopefully this has been helpful! Stay tuned for future guides for academic and healthcare professionals to help them take control of their money. The next step is determine your spending habits by creating a statement of cash flows. What is your net worth ratio?Want to get serious about taking control of your money?No thanks, I want someone to do this for me.Want Help? Schedule a free initial visit here Chip Hill, CFP® AAMS®Financial Advisor155 W Bell CtLexington, Ky 40508Cell: 859.948.8717[email protected]chillfinancialplanning.com Investment adviser representative and registered representative of, and securities and investment advisory services offered through Voya Financial Advisors, Inc. (member SIPC). *Neither Voya Financial Advisors nor its representatives offer tax or legal advice. Please consult with your tax and legal advisors regarding your individual situation. Chill Financial Group is not a subsidiary nor controlled by Voya Financial Advisors.