It is a new year and you have resolved to take control of your finances. You may have already established goals you want to achieve such as building an emergency fund of 3 to 6 months of expenses, saving up the down payment for a home, providing for your children‘s college education, saving enough for a comfortable retirement, or leaving a legacy for your heirs.

Whatever your goal, the first step to reaching that goal is having a plan. Preparing a budget is the way of planning to insure your spending will be less than your income so there will be funds left over at the end of each paycheck to put away in savings for your goals.

Assuming you‘ve set your goals and built a budget that creates a plan for how to get there, you now need to measure how well you‘re doing working towards that goal. The tool we use to measure that performance is a personal financial statement.

Headshot of NDBT Chief Lending Officer Allen Hudson

Allen Hudson
Chief Lending Officer

A personal financial statement is a snapshot of your financial position at a specific point in time. Very simply it is a listing of everything you own and everything you owe. The value of everything you own less the total of all that you owe is considered your financial net worth. The change in that net worth over time provides information regarding how well you are building wealth.

There are lots of forms available for helping you to prepare your personal financial statement, but you could simply sit down with a pad and pencil…or a digital spreadsheet… and list your assets starting with your liquid assets such as checking and savings accounts. Then write down the value of any investments you might have such as a certificate of deposit at NDBT, mutual funds, stocks or bonds. Fixed or longterm assets such as a home or other real estate or vehicles would be next. Lastly, include the value of any retirement accounts such as an IRA or 401k. Total these up and you have your total assets.

Next list everything you owe such as credit card balances, installment loans…for example a car or boat loan, student loans and mortgage loans. Total these up and you have your total liabilities.

Subtract your liabilities from your assets and you have your net worth. As you add to your savings month by month and as you pay down your debts, the value of your net worth will grow over time.

Knowing where you are going with your financial goals is important, but it is equally important to measure your progress on that journey. Preparing a personal financial statement at the end of the year is a great way of visualizing where you are on that journey.

For more financial wellness tips, please take a look at the other videos in our series from NDBT financial experts.

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