Well, that dreaded time has arrived – the time to update the net-worth statement for the year and set those 2025 financial goals. In full transparency, we update our net worth semi-annually to ensure we stay on track and make adjustments if needed.

However, the big net-worth update happens in the last week of January, once all the year-end statements for investments and pensions become available. If you have any debt, this is also when year-end statements show what is owed and what has been paid off.

For us, waiting until the end of January provides a true indication of our overall wealth, whether we are on track or falling behind with our yearly goals, and how we are progressing towards our long-term goals. It also gives us a clear picture of how our assets are allocated, how our investments have performed, and whether any adjustments are needed to achieve our short-term (yearly) and long-term goals.

I thought I would share some helpful tips on why we do this – and, more importantly, where to start.

First, creating a net worth statement provides a comprehensive snapshot of a person’s – or your family’s – financial health and offers six key areas of understanding:

1, Financial clarity

A net-worth statement consolidates assets and liabilities, showing you your financial position. This transparency helps you understand where you stand financially and what adjustments may be needed.

2, Goal setting

By evaluating net worth, individuals can set realistic financial goals. Whether buying a home, paying off debt, saving for retirement, or funding education, having a clear picture of your net worth helps you plan strategically.

3, Tracking progress

Regularly updating a net worth statement allows individuals to track their financial progress. It serves as a benchmark for evaluating savings, investments, and debt reduction improvements, fostering a sense of accomplishment.

4, Debt management

A net-worth statement lists liabilities to highlight areas of concern regarding debt. This awareness encourages proactive measures to pay down high-interest debts and improve spending habits.

5, Investment strategy

Understanding your net worth can guide investment decisions. It helps individuals assess their risk tolerance and determine how to allocate their portfolios effectively based on their financial goals and time horizon.

6, Financial planning

A net-worth statement is a vital tool for financial planning. It can facilitate more informed discussions with financial advisers, helping tailor investment strategies, retirement plans, and estate planning to align with overall financial objectives.

For us, a net-worth statement is invaluable from a financial tracking perspective. There are also some great online tools that can help you develop a comprehensive net-worth statement with built-in analytical features – remember, analysing your net worth is crucial.

Since I first started updating our net-worth statement in 2008, I have continued using the same programme and format. For me, that means an Excel spreadsheet, which has evolved over the years into multiple tabs to allow for a more detailed analysis.

Here are the criteria for generating a net-worth statement:

Assets

• Current assets: cash and cash equivalents, chequing and savings accounts, CDs, and other liquid assets.

• Investments: stocks, bonds, mutual funds, retirement accounts (including company pension plans), and other investments.

• Real estate: market value of properties owned, including primary residence, investment properties, and land.

• Personal property: value of personal items such as vehicles, jewellery, art, collectables, and furniture.

• Other assets: business ownership, intellectual property, or other assets that do not fit into the above categories.

Liabilities

• Current liabilities: outstanding credit card balances and personal loans.

• Long-term liabilities: mortgage balance, student loans, and other long-term debts.

Formula

Net Worth = Total Assets – Total Liabilities

Now, there are a few more things to consider when it comes to a net-worth statement:

Currency considerations

You may have investments or savings in different currencies. When generating a net-worth statement, you need to choose a single currency for reporting. I use US dollars as my reporting currency since I earn in US dollars and most of my assets are in the same currency.

For example, 50,000 Australian dollars would be represented on my net worth statement as US$31,160. This is one reason I use Excel – I input the exchange rate formula in a cell, so I can always see what rate was used when I review past net worth updates.

Investment breakdown

To get a true reflection of your investments and how well diversified they are, you need to break them down, which can be a long and tedious process if you have multiple accounts. The goal is to determine how much you have in cash or cash equivalents, how much is in fixed income, and how much is in the stock market. This is the only way to make well-informed decisions. Trust me – putting in the time will be a wise long-term decision.

Develop short- and long-term goals

Short-term goals:

• Increase voluntary contributions by 2 per cent to my company pension plan. If this is the goal, you should expect to see an increase in your pension balance by the end of the year (barring market fluctuations).

• Save $15,000 as an emergency fund and invest it in a money-market account. If this is the goal, you will need to adjust your budget accordingly to achieve it, and by the end of the year, you should expect to see the results.

Long-term goals:

• Increase net worth by 10 per cent per year. If this is your goal, you need to determine how much you need to save and what rate of return your investments must generate to achieve it, then adjust accordingly.

• Retire at 65 with $3 million. If this is your goal, ensure your monthly and annual savings are on track and that your investments are generating the necessary returns based on your time horizon.

Compare your net worth against your goals – not those of others

The only thing that matters is how you are doing and whether you are achieving the goals you set. Comparing your financial situation to someone else’s is, in my view, a form of insanity – it’s like comparing apples to potatoes.

Everyone’s circumstances are different and shaped by individual choices, so comparing yourself to others serves no purpose.

Remember, creating a net-worth statement is a foundational aspect of financial literacy and empowers you to take control of your financial future. Regular updates can help you stay focused on your long-term financial objectives.

• Carla Seely has 24 years of experience in the international financial services, wealth management and insurance industries. During her career, she has obtained several investment licences through the Canadian Securities Institute. She holds the ACSI certification through the Chartered Institute for Securities and Investments (UK), the QAFP designation through FP Canada, and the AINS designation through The Institutes. She also holds a master’s degree in business and management