One of the common questions asked on a life insurance application is your net worth. Do you know what your net worth is or how to calculate it? If not, do not let this discourage you. Your net worth has nothing to do with approving you for a certain health classification. It approves you for a certain amount of coverage. If you make $100,000 per year and you are applying for $20 million dollars of coverage, you might have a hard time being approved for that amount. Why do you need this amount of coverage? Are you worth this much money? However, if you make $100,000 and you are applying for $2 or $3 million dollars in coverage, it is more justifiable. This is the reason your net worth is a factor.
Outside of life insurance, it is important to know your net worth; it is a snapshot of your current financial situation. Regardless of your financial situation, your net worth can help you determine financial goals as well as measure progress. You should be calculating and evaluating your net worth every year.
Net worth is your assets minus your liabilities. Seems simple but how do you calculate it? Assets are the items that you own that can be converted to cash. Liabilities are your debts.
Checking and Savings
Personal Property (jewelry, art, collectibles, etc)
Cash Value Life Insurance
Credit Card Debt
I am sharing the tool that I use when assisting my clients in calculating their net worth. The tool I use most often is the CNN Net Worth Calculator. This tool is quick, straight forward and easy to use. Give it a try and KNOW YOUR NET WORTH!