Net Worth Statement
A Net Worth Statement (Personal Balance Sheet) is a financial snapshot showing total assets minus total liabilities at a specific point in time, providing the foundation for financial planning by measuring wealth and tracking progress toward goals.
Exam Tip
Net Worth = Assets - Liabilities. Positive is goal but not always achievable (student loans). Track annually minimum. Liquidity ratio target = 3-6 months expenses.
What is a Net Worth Statement?
Net Worth = Total Assets - Total Liabilities
A snapshot of financial position at a specific moment.
Asset Categories
- Liquid: Cash, checking/savings, money market
- Investment: Stocks, bonds, mutual funds, retirement accounts
- Real Estate: Primary residence, investment properties
- Personal Property: Vehicles, jewelry, collectibles
Liability Categories
- Current: Credit cards, bills due
- Consumer: Auto loans, student loans
- Real Estate: Mortgages, HELOCs
Key Ratios
- Liquidity Ratio: Liquid Assets / Monthly Expenses (target: 3-6 months)
- Debt-to-Asset Ratio: Total Liabilities / Total Assets
Study This Term In
Related Terms
Emergency Fund
An Emergency Fund is a readily accessible savings reserve equal to 3-6 months of essential living expenses, designed to cover unexpected costs or income loss without requiring debt or liquidating investments.
Financial Planning Process (7 Steps)
The Financial Planning Process is the CFP Board's official 7-step framework for delivering comprehensive financial advice, beginning with understanding client circumstances and progressing through goal identification, analysis, recommendation development, presentation, implementation, and ongoing monitoring.
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