Leap Year Challenge: Know Your Net Worth

posted 2/29/2016 in General

Lead Day Challenge: Calculate Your Net Worth

We all know that Leap Day is that “extra” day that gets tacked on to the end of February every 4 years to better align our calendar with the earth’s movement around the sun.   Leap Day typically comes and goes without much ado unless you happen to be born that day or you are a woman who proposed to your husband on Leap Day.  In those cases, Leap Day is a pretty big deal worth celebrating.  For the rest of us, that extra day on the calendar might not have a big impact on our lives.

Lincoln Savings Bank wants this Leap Year to matter in your financial lives.  So, we are challenging you to do something productive this Leap Year: We want you to Know Your Net Worth.  It only takes a little time to calculate, and it's a good number for you to know as a baseline to track your financial progress. 

What is Net Worth?

Net Worth is a simple equation:

Assets – Liabilities = Net Worth

Why should you know your Net Worth?

Why not?  (ok, we know that’s not helpful)  

Most people don’t bother to calculate this number, but it’s the one financial number that every person should know.  Your Net Worth is the BEST way to measure your wealth.  It’s also the quickest way to track your financial progress!  It is a good measure of your overall finances because it takes the emphasis off of your income alone and can put your debt in perspective (either good or bad).   

How do I calculate my Net Worth?

The easiest place to start is with a piece of paper and a pencil.  Or, if you’re more of a computer person, open up a new spreadsheet.  You will need 2 columns, and under each column you will list all your applicable financial assets and liabilities by dollar amount.  Below is a list of things to include under each column.  Once you have your lists made, add up each column, then subtract the Liabilities from the Assets.  That number is your Net Worth!

cash on hand or in the bank
certificates of deposit
treasury bills
money market funds

employer retirement plans (401(k) or 403B plans)
personal retirement assets (traditional / Roth IRAs or solo 401(k)s)
non-retirement investments (any investment assets that are not part of your retirement plans)
real estate value (for all property you own)
business assets or equity (you may want to include the net worth of your business or any significant business assets in your personal net worth if you’re a biz owner)
personal assets (cars, furniture, jewelry and other personal effects, but estimate conservatively)
personal loans receivable (loans to family, friends, or business associates if you think you will collect)
other assets (such as the cash value of life insurance policies)
primary / first mortgage
second mortgage or HELOC
other mortgages (investment or recreational property)
installment loans (car loans, boat loan, motorcycle loan, RV loan, installment loans for other possessions like furniture, appliances, etc.)
student loans
credit cards
business loans (likely a personal liability)
personal loans
other liabilities (medical debts, tax debts, etc)

You know your Net Worth.  What now?

Now that you’ve taken the time to calculate your Net Worth, consider how that number matches your expectations. You may be wondering how your Net Worth compares to others.  The table below is taken from the Federal Reserve Bulletin dated June 2012 and is based on data from a 2010 Survey of Consumer Finances. 

2010 Median Family Net Worth
Age Net Worth
Less than 35:  $9,300
35–44: $42,100
45–54: $117,900
55–64: $179,400
65–74: $206,700
75 or more: $216,800

Lincoln Savings Bank is here to help! If you have questions or concerns about what your Net Worth means, feel free to contact us!

Lincoln Savings Bank, Member FDIC

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