Net worth sounds so formal. It sounds like something, everyone else should be doing, but not you.
Unfortunately, you should not be thinking like that because every one has a net worth and everyone needs to periodically evaluate their net worth. Determining your net worth is not a small task. It takes time to gather the pertinent information, and evaluate it. But you should run the analysis, so that you have a financial base to work from. Don’t you want to know where you stand financially?
What should be included in determining your net worth will depend upon whether you are an individual or a business owner. Let’s explore.
Your Net Worth:
- To determine your net worth, you simply subtract your total liabilities from your total assets – the difference is your net worth.
- Where people get confused is not knowing what your assets and liabilities are.
- Also not including all of your assets or liabilities in your analysis.
- Your home.
- All of your investments.
- 401k account, IRA investments, CD’s, Savings Accounts, Stocks & Bonds help outside your retirement accounts
- High value jewelry, collectibles, coin, art.
- Your mortgage.
- Car Loans.
- Student Loans.
- Credit card balances
Small Business Owner:
Business owners have many assets and liabilities that individuals do not. Some are obvious, some are easily forgotten or not considered.
- Account Receivables.
- If you have a Business IRA, which can be a SEP or a Simple IRA plan.
- Solo 401k, which is available for business owners with no employees.
- If your only other employee is your spouse, the spouse is not considered an employee.
- A solo 401k plan is the same as a regular 401k plan except for the contribution limits.
- The contribution limits on a solo 401k plan are higher.
- If you are over age 50, for 2010, the contribution limits $54,500.
- If you are under age 50, for 2010, the limit is $49,000.
- Another asset to the business would be a self-directed Roth IRA, which is a Roth IRA where you determine where the money will be invested. This is how most Roth IRA’s are set up.
- Setting up a self-directed Roth IRA is standard, contact your broker, complete the forms, start your contributions.
- Accounts payables.
Ask your accountant for additional guidance in determining your net worth. These professionals usually have a lot of the information used in determining ones net worth. If you use your accountant as a source of information, not only will the task be made easier, but maybe the information will be more accurate also.