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Assessing Your Assets

If you've got a job, you're probably bringing home a paycheck. Very few people show up at the office every morning just because they love to be there. The paycheck at the end of the week (or every two weeks) might not be the only thing you like about your job, but it's pretty high on the list, right?

Even if your salary isn't as much as you'd like it to be, it's probably still your primary source of income. When you begin to consider your net worth, or financial situation, your salary is very important. For most of us, the salary pays the bills, boosts savings accounts, and sets up emergency funds.

Show Me the Money

Your net worth is what you get when you add up all your financial assets and then subtract all your financial liabilities.

When you examine your financial situation, however, you might be pleasantly surprised to find out you have more than you realize. There could be money you've overlooked. To determine your net worth, you have to know exactly what you have and exactly what your expenses are. After you've thought carefully about any and all funds you might have in the form of savings, bonds, mutual funds, or whatever, take a minute to fill out this net worth worksheet (using the value of the asset as of the valuation date). It should help you to get a better understanding of exactly what you have and what you're worth. Who knows, you might be pleasantly surprised!

Fill out the and organize your finances!

Think carefully about what you might have. Are there any savings accounts that were set up for you when you were a kid? What about savings bonds? Some families are great at buying U.S. savings bonds for birthdays. Have you put aside money someplace for emergencies? Do you have money saved for a car or a house?

Show Me the Money

Cash value life insurance is a type of insurance policy, purchased for the long term, which sets aside funds within the policy for future payment of premium. The accumulated funds can be borrowed by the policyholder and, thus, count as an asset for net worth purposes.

The interest you earn on a savings account counts as income (and is taxed as income), although you probably don't regard it as such. If you have any bonds, the interest on them also counts as income. Your income tax refund, bonuses, and any monetary gifts you receive also count as assets and must be counted when considering what you have. If you have a cash value life insurance policy, the amount of cash value is counted toward your net worth. Generally, though, when we talk about income, we're primarily talking about your salary.

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Excerpted from The Complete Idiot's Guide to Personal Finance in your 20s and 30s © 2005 by Susan Shelly and Sarah Young Fisher. All rights reserved including the right of reproduction in whole or in part in any form. Used by arrangement with Alpha Books, a member of Penguin Group (USA) Inc.

To order this book visit the Idiot's Guide web site or call 1-800-253-6476.

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