Fusion Five

Net worth is synonymous with your wealth at a single point in time. It is the starting point for financial planning and indicates your capacity to achieve your financial goals. Assets are arranged in order of liquidity; that is, the ability to convert them into cash without losing much in the conversion. The most liquid are at the top of the list and include cash, checking accounts, money market securities, and money market mutual funds. Determining the value of your stocks, bonds, and mutual funds is easy. The prices can be found in the financial pages of a newspaper or obtained from brokerage and mutual fund statements. Determining the current value of pension funds may be more difficult if the pension fund provides amounts of future income to be received. This means that for this type of plan, you would need to determine the present value of the plan. The human resources or benefits department of your com- pany can provide this information. If the cash surrender values of your whole life insurance policies and annuities are not shown on the latest statements you receive, call your insur- ance agent for this information. Your home is likely to be your largest asset, so its value should not be over- inflated or underinflated. The figure that you are looking for is the current market value; that is, what someone would be willing to pay for your house. Generally, the cost of the property is not particularly relevant if you have owned your house for a long period of time. The most recent selling prices of houses similar to yours in your area are a good indicator of the likely market value of your house. Real estate brokers can also provide you with an esti- mate of the value of your house. The value of cars can be obtained from used car price guides which can be found in most public libraries, or you can obtain the price of your car from your bank, which should have copies of these guides. Household furniture, clothing, and personal effects should be more con- servatively valued so as not to overstate their value. In an actual sale of these items, you might get far less than the estimated values. Add the estimates of the value of all the items that you own and you will have the total of your assets. For most people, a home mortgage is their largest single debt outstanding. The amount to include is not the original amount of the loan but the cur- rent outstanding balance. The reason is because a part of the monthly payments made to the lender over the duration of the mortgage reduce the outstand- ing balance of the loan. The current outstanding balance of the loan may be obtained directly from the lender or from mortgage statements from the lender. You can also determine the balance yourself.

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