AFC Module 7 - Net Worth Statement Flashcards
NET WORTH STATEMENT
Personal financial statement which describes an individual’s or family’s financial condition on a specified date by showing assets, liabilities and net worth.
BALANCE SHEET
Another name for net worth statement
PURPOSE OF NET WORTH STATEMENT
To show individual ‘s or family’s solvency and to show progress toward meeting goals
HOW OFTEN SHOULD A NET WORTH STATEMENT BE UPDATED?
At least once a year
FORMULA TO CALCULATE NET WORTH
Total Assets - Total Liabilities = Net Worth
EXAMPLES OF MONETARY ASSETS
- Cash
- Checking accounts
- Savings accounts
- CDs
- Money Market accounts
- Money owed to the individual
WHAT ARE EXAMPLES OF LIFESTYLE ASSETS
- Automobile
- Boat
- Motorcycle
- House
- Furniture
WHAT ARE EXAMPLES OF INVESTMENT ASSETS?
- Stocks
- Bonds
- Retirement Accounts
- Life Insurance
SHORT TERM LIABILITIES EXAMPLES
- Credit Card Debt
- Personal Loan
LONG TERM LIABILITIES EXAMPLES
- Student Loan Debt
- Mortgage
- Auto Loan Debt
- Other debt/liabilities
WHAT ARE WAYS TO INCREASE NET WORTH?
Increase assets
Decreasing debts
or doing both
What is the meaning of values?
A person’s belief about what is important, desirable, and worthwhile.
What is meant by an Emergency Fund?
An account that is used to set aside to be used in an emergency. In case of a job loss or a car breaks down.
What are Asset?
Everything you own that has Monetary value
What are liabilities?
Everything you owe
What is a Cash Flow statement?
Summary of all income and expenses over a specific time period.
What is a deficit?
Expenses exceed income on a cash flow statement
What is a surplus?
Total income exceeds total expenses on a Cash flow statement.
What are examples of fixed expenses?
Saving/investments
housing
internet services
telephone service
Taxes
Insurance- health, life…
What are examples of variable expenses?
meals
utilities
childcare
Dry cleaning
What are variable expenses?
expenses you have a substantial control over
