Most people know their income, but very few know their actual net worth. A Personal Net Worth Statement is the scorecard of your financial life—and if you're a real estate investor or business owner, it's the most important document you'll ever create.
What is a Personal Net Worth Statement?
A Personal Net Worth Statement is a snapshot of your financial health at a specific moment in time. Unlike an income statement (which tracks money coming in and out), a net worth statement tracks what you own (assets) versus what you owe (liabilities).
The Formula: Assets - Liabilities = Net Worth
Why Do You Need One?
- Loan Applications: Banks require it for almost every commercial loan, business line of credit, or SBA loan.
- Investment Eligibility: To qualify as an "Accredited Investor," you often need to prove a net worth over $1M (excluding your primary residence).
- Wealth Tracking: You can't improve what you don't measure. Tracking net worth helps you see if you're actually building wealth or just earning high income.
How to Create Your Statement
Step 1: List Your Assets
Start with everything you own that has cash value. Be realistic about valuations.
- Cash & Equivalents: Checking, savings, money market accounts.
- Investments: Stocks, bonds, mutual funds, crypto.
- Retirement: 401(k), IRAs.
- Real Estate: Primary residence, rental properties (use current market value).
- Personal Property: Vehicles, jewelry, art (only if significant).
Step 2: List Your Liabilities
List everything you owe. This is often the most painful part, but accuracy is key.
- Mortgages: Primary and investment property loans.
- Consumer Debt: Credit card balances, personal loans.
- Auto Loans: Balances on all vehicles.
- Student Loans: Total outstanding balance.
Step 3: Calculate
Subtract your total liabilities from your total assets. The resulting number is your Net Worth.
The Problem with Spreadsheets
Your bank balances change daily. Your stock portfolio fluctuates every second. A spreadsheet is obsolete the moment you save it.
Calculate My Net WorthCommon Mistakes to Avoid
It's tempting to think your property is worth the highest comp on the block. Be conservative. Lenders will verify this.
If you co-signed a loan for someone else, that is a contingent liability. It needs to be disclosed.
High income does not mean high net worth if you spend it all. Lenders look at the balance sheet, not just the pay stub.
Ready to Build Your Statement?
You have two options: