Posts Tagged net worth

Time for a Financial Check-Up

In order to make sure that we’re in good health, many of us will be sure to check in with our doctor for a yearly once-over. The same is true for your finances. If you want to make sure that all is well on the money front, it’s equally important to complete a yearly financial check-up.

I always do my financial check-up at the beginning of a new year, but any time of year will work. It doesn’t take long, and is relatively painless, but checking in with your financial big-picture once a year will give you a great reference point as to where you are now and how far you’ve come when you check in this time next year.

Step 1: Check your Credit Report

It’s important to check in with your credit report once a year just to make sure that everything that is listed there are debts that you yourself have signed up for. This will help to make sure that there hasn’t been any fraudulent activity under your name.

It will also give you a sense of where your debts lie. Listed you’ll see any loans that you’ve taken out and have paid off or in the process of paying off. You’ll also see the last reported balances on any rotating debts like credit cards or lines of credit.

Checking your credit report is fast, easy, and more importantly free. Equifax and TransUnion are two of the most popular websites that you can use. Just simply enter in your name, address, and social security number, and within seconds you’ll have access to your credit report.

Step 2: Calculate your Net Worth

When calculating your net worth, I always start with listing down what we own. I start off with the liquid assets which includes our checking account, savings accounts, and our emergency fund. I also list the current balances on any investments such as our retirement funds and education funds, as well as the current worth of my pension. The last thing I list are the major assets that we own including the resale value of our home and two vehicles.

Once you’ve figured out what you own, the next step is to add up what you owe. Included in this list should be any outstanding debts such as credit cards, student loans, lines of credit, or medical debt. The other debts to include here would be the outstanding balance that is left on the mortgage and car loans.

To calculate your current net worth you simply take the amount you own and subtract the amount you owe. Whatever is remaining is your net worth. I like to compare our net worth year over to year to see the progress that we’re making.

One thing I did notice this year was the substantial increase we saw in our net worth once we finished paying off all of our consumer debt. It’s amazing to see just how much your net worth grows when you can keep your money for yourself, rather than giving it to the bank in the form of payments.

Your Turn!

  • How often do you check in with your finances?