Finances After 55. Sylvia Lim

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СКАЧАТЬ the cash value of these policies. Do not include the benefit amount; that will belong to your beneficiaries, not to you.

      Step 5: Fill in the liability values

      Fill in the amounts of the “Liability” items on the worksheet. Use the values from all available account statements. You may round the values to the nearest one hundred dollars to simplify your calculations.

      These are the debts you owe various creditors, including credit card companies and your banks. Don’t overlook the debt you may owe to the taxman. (That one should be a top priority in your payment plan.)

      Step 6: Fill in the other items/insurance policies

      This section itemizes the various insurance policies and their values. Although you pay for these policies, they are not considered assets, because their values are not recognized until certain events occur (such as a particular illness or death), or because they benefit someone else (a beneficiary) and not you. These policies have no current value to you. You simply want to note their existence.

      Step 7: Total up your assets

      Add up the value of all your assets listed on the worksheet.

      Step 8: Total up your liabilities

      Add up the value of all your liabilities listed on the worksheet.

      Step 9: Calculate your net worth

      Subtract the liability total from the asset total. You now know your net worth as of the date you chose in Step 3.

      Step 10: File your paperwork

      Divide the accordion file into two sections. Label the first half of the file “Assets,” and the second half “Liabilities.” File your asset-type statements and papers in the “Assets” section, preferably in the same order as you listed them on the Net Worth Worksheet. Do the same with the liability-type statements and papers.

      To see how net worth can act as a financial snapshot, look at Sample 2, the completed Net Worth Worksheet of John and Mary as at September 30, 2004. They’re both in their early 60s and in good health. Note the following:

      1. John has assets of $223,000; Mary has $224,000; and assets in joint names of $437,750. This brings the total household assets to $884,750 as of September 30.

      2. Their household liabilities total $28,000.

      3. The household net worth is $856,750. That’s the difference between total assets and total liabilities.

      4. They have bank savings totaling $31,000. The cash in the term deposits and savings is for emergencies. It can be accessed immediately.

      5. They have income-producing investments and retirement savings worth $100,750 and $400,000 respectively.

      6. They have $30,000 cash value in their life insurance policies. They have named each other and their two grown children as beneficiaries. The cash value will continue to grow over time. They can choose to borrow against it or withdraw the balance at a later time.

      7. Their house is worth $250,000, with a remaining mortgage balance of $25,000.

      8. They own two vehicles and a recreational vehicle worth $40,000.

      9. They have prepaid their respective funeral arrangements.

      10. They have purchased critical illness insurance, paying them $50,000 each should they become terminally ill as defined under their policies.

      11. John has guaranteed their son John Junior’s personal loan of $2,000, which John Junior is expected to repay in full.

      They are comforted by the knowledge that —

      • they have savings set aside for emergencies, which are sufficient to support them for the next six months;

      • they have investments inside and outside their retirement accounts;

      • their debts are small and manageable;

      • they have insurance coverage (such as property, life, health care and critical illness insurance) to protect themselves against certain unexpected perils; and

      • their home can provide them with options for additional income. (These options are discussed in Chapter 8.)

       Sample 2: Net Worth Worksheet

      

      When calculating your own net worth, don’t rush. Take your time. You may want to take a break or two, if you need to do so. Remember, your net worth is a financial snapshot of what you’re worth as of a particular moment. Keep taking those snapshots, at least once a year, to measure how you are progressing, and assess whether or not your progress is sufficient to fund the kind of retirement you want.

      Can you supplement your income from investments and retire? Do you need to work a few years longer? Can you downsize your home and change your net worth snapshot for a better retirement? These and other questions can be answered only after the snapshot is taken.

      This process is a crucial one, as it is one of the starting points for planning all phases of your retirement. Use the Net Worth Worksheet to complete your financial snapshot today.

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