Overview
Main Menu Name: Net Worth
Provides both a current and projected balance sheet. Lists current assets, liabilities, and net worth. Categorizes assets by liquidity. Calculates the percentage of total assets attributable to each asset or liability category. Totals each category. And, projects the value of each asset for four future time periods at a specified growth factor.
In this article:
Background
Net worth is the most comprehensive statistic that can be used in measuring the financial position of an individual, family, or business. It takes into account all assets, both short-term and long-term, as well as the liabilities that are claims against those assets. Presumably, it shows the amount of money that would be available if all assets were liquidated, and all liabilities paid off, though this is a very unlikely occurrence.
An accurate net worth calculation depends on a careful valuation of all assets, especially personal assets most financial assets, such as savings accounts, certificates, stocks, and bonds. Similarly, liabilities are easy to measure since they are generally represented by some obligation such as a mortgage, bank loan, or account balance. More difficult is placing a value on a home, furnishings, clothing, and other personal possessions such as antiques or collections. Often the value of these can only be estimated or valued through an expert appraisal.
Projecting net worth compounds estimated growth rates over future time periods. Conservative estimates should be used, and it is recommended that time periods not be longer than ten years. A yearly review of actual results should be carried out to see if past estimates have been accurate and to update growth rates according to current economic conditions.
Why should I use this calculator?
- Evaluate an individual's or family's overall financial position.
- Determine if liquid assets are sufficient to meet unexpected or emergency needs.
- Measure the rate of return being earned on financial assets.
- Determine if a revised investment strategy is necessary.
- Assess the current debt position to see if it is reasonable or whether refinancing is necessary.
- Project future worth to determine if financial planning goals will be met with current plans or whether changes need to be made.
- Determine whether current insurance programs are adequate given the expected growth in net worth.
Getting Started
Net worth is the most comprehensive statistic that can be used in measuring the financial position of an individual, family, or business. It takes into account all assets, both short-term and long-term, as well as the liabilities that are claims against those assets. Presumably, it shows the amount of money that would be available if all assets were liquidated, and all liabilities paid off, though this is a very unlikely occurrence.
An accurate net worth calculation depends on a careful valuation of all assets, especially personal assets most financial assets, such as savings accounts, certificates, stocks, and bonds. Similarly, liabilities are easy to measure since they are generally represented by some obligation such as a mortgage, bank loan, or account balance. More difficult is placing a value on a home, furnishings, clothing, and other personal possessions such as antiques or collections. Often the value of these can only be estimated or valued through an expert appraisal.
Projecting net worth compounds estimated growth rates over future time periods. Conservative estimates should be used, and it is recommended that projection periods not be longer than 10years. A yearly review of these projections should be carried out to see if past projections have been accurate and to update growth rates according to current economic conditions.
Entering Data
There are five different tabs that must be completed:
General Tab
- Name: Enter the name of the client.
- First Year: Enter the first year of the analysis.
- Number of Years to Project Net Worth: the numbers representing the number of years to be used in projecting net worth.
- What year should be graphed?: the year to be displayed as a graph.
- Other Tabs: Enter an annual growth factor and current dollar value for each asset and liability
Results
The program totals the projected net worth for all four categories (each tab is a category) and displays these totals for the current year and for the projected years. It also provides an overall net worth total for the current and projected years.
The Graph Tab shows the net assets for the specified year in the analysis.
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