Читать книгу Finances After 55 - Sylvia Lim - Страница 17

You can find out what you are worth in dollar terms today simply by taking stock, at fair market value, of everything of value that you own (that is, your assets), and subtracting from that number everything you owe (your liabilities, or debts). The difference is your real worth, or net worth today. A net worth statement shows how well off, financially, you are at a given moment. It not only identifies your assets, but also states their fair market value and the forms in which they exist. Likewise, your liabilities and the nature of these obligations are also identified and valued.

Assets less liabilities equals net worth. For example, if your house on December 31, 2003, is worth $200,000 and has a mortgage balance of $150,000, your net worth at that point in time is $50,000. That’s the difference between what you own (the house at $200,000) and what you owe (the mortgage at $150,000).

Now, let’s progress a year into the future. You are now valuing your net worth on December 31, 2004. The process is the same, but the values will likely be different. The fair market value of your house may have increased to, say, $225,000. Your mortgage, however, has decreased to $145,000 (due to your diligent payments). Your net worth on December 31, 2004, is $80,000. That’s the difference between $225,000 and $145,000. In summary, you’ve increased your net worth by $30,000 in just one year!

Ideally, your net worth should be growing as you age. To achieve this growth, you must increase your assets and/or decrease your debts. It is a good idea to calculate the change in your net worth at least once every year to measure your progress or setbacks. Depending on your income and spending patterns on retirement, a percentage of your net worth should be used to continuously generate investment income to —

• supplement your retirement living,

• supplement your long-term care,

• grow your net worth,

• leave an estate for your loved ones, and/or

• leave a legacy on death to support your favorite charties, humanitarian agencies, and/or religious organizations.