Notes

Understanding Your Net Worth Statement - For Richer Or Poorer?



Did you know?

It's not what you currently own that determines whether you're rich or poor. Just because both my spouse and I possibly could be living in a large house in an upmarket suburb, drive two Mercedes Benz, and take our youngsters to a pricey school, does not automatically mean we're rolling in fabulous wealth like Ali Baba of the Arabian Nights story.

Actually, there's something else, and bank managers and other lending institutions love it.

Do you know what that thing is? I'll let you know in a moment.

Be prepared for a shock to one's body!

Well, the one thing that many bank managers and lending institution like to see on their desk before they are able to even consider doing business with you is an economic document... actually, a financial statement, since many people prefer to call it.

And the name of the financial statement is...

Net Worth Statement!

What's a Net Worth Statement?

To put it simply, a net worth statement is an economic document that shows your personal Net Worth (or true worth - what you're really worth in financial terms. It's the overall balance remaining after deducting your total calculated liabilities from your own total calculated assets.

The balance that remains after doing this simple math calculation can be your Net Worth, or your 'true worth!'

Hence, Balance Sheet.

Your Net Worth statement is a file which tells other people or anyone who's interested, such as a bank manager, a lending institution, etc. whether you're rich or poor. Put simply, would you possess sufficient assets to cover your debts in case you be required to cover back a loan, for instance, at short notice?

Your Net Worth also can tell others if you're moving forward, going backward, or just standing in the middle of the trail of one's financial life.

For example, an advantage (+) amount next to your the amount (+$350 678.00) means you possess a lot more than you owe others.

Problem is IF your Net Worth shows a minus (-) amount (-$350 678.00), it really means bad news for you. Or it indicates your total liabilities exceed your total assets, and you borrowed from others more than you currently own. And your rivals view this as another way to state your fortune is all gone... finished... kaput.

Or "He's dead broke!"

Why did I claim that?

That's because after your creditors have sold all that you have to cover your debts, there will be no further money left to your name. And the worst part is that you it's still required to cover more of one other creditors whose outstanding accounts remain unsatisfied.

But the fact that you've a minus (-) net worth does certainly not means all is lost. You see, many people understand that life is such as for instance a roller-coaster. Sometimes, and through no fault of yours, things can go topsy-turvy on you. For richer or poorer.

And for individuals who are fortunate enough to learn this, a minus (-) net worth is the catalyst that they might need to propel them to newer heights of financial freedom.

That's because as soon as they are up against a problem like this, they do everything inside their power to create in more income and assets to their coffers to stabilize the minuses inside their net worth statement.

Still wondering why it's called a Balance Sheet?

And so the question is...

Maybe you have looked into your Net Worth, or put aside some of one's precious time to balance your assets and liabilities lately? If not, today is the right time to make fully sure your financial statements really are a true reflection of one's true wealth.

Besides, if you don't, how do you want to know whether you're moving forward, going backward, or simply standing in the middle of the road of one's financial life?