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Once a year, you should prepare a net worth statement by simply adding up what you own and subtract from this what you owe. The remainder is what you are worth, at least in financial terms.
If you prepare a net worth statement each year, you will see if your assets are increasing and your debts are decreasing over time – if you are building wealth. If your net worth has declined from the past year, this may tell you changes are needed for you to live within your income and provide for the future.
The estimate of the value of your home and contents may help you decide how much homeowner’s insurance you need to purchase. The total of your liquid assets (assets that can be quickly converted to cash) may provide information about how well prepared you are for a financial emergency or loss of income. If you need to apply for a home or auto loan or talk to an estate planner, you may be asked to provide a net worth statement.