Increasing wealth can be accomplished in at least two ways. For some, it means adding to savings or investments. For others, the first step toward increasing wealth is to eliminate or reduce debt. How do you measure wealth?
A new worth statement, sometimes called a financial statement, measures wealth. Like a photo, it gives us a clear picture of our financial health and wealth—or how much we are worth—at one point in time. Most families start out with negative or very small net worth that continues to grow through mid-life and then begins to shrink as we age into retirement.
Lenders usually require a net worth statement when you apply for a home loan or try to renegotiate debts. This information may also be required for legal matters such as divorce, child support orders, bankruptcy, or succession after death.
A net worth statement has two parts: what you own (also called assets) and what you owe (debts or liabilities).
Would you like to know what your net worth is? We encourage you to begin working on a net worth statement to get a picture of your current financial health. You can download the Net Worth Statement to help you with this task.
Net Worth Increases with Age and Income
The following charts provide an average net worth by age and by household income. How does your worth compare with families of similar age and income. Circle your family income in the first chart and your age in the second. Are you average?