When to Make a Net Worth and Cash Flow Statement
For most people, I recommend you create and update both of these annually. Use January to pull year-end statements and values to compile your Net Worth Statement. If you keep a good budget, you can create your Cash Flow Statement for the prior year in January as well. Otherwise, you may have to wait until your taxes are done to gather the data.
If you are passionate about improving your finances or have a dynamic income, you may want to do it quarterly. But most things don’t change enough in that amount of time. Your income is probably the same. Your mortgage hasn’t been paid down by much. Don’t look at your investments that often. You can track some of the things that you are trying to improve in your budget, but a full statement once a year should suffice.
How to Make a Net Worth and Cash Flow Statement
If you are a Financial Planning Client of my firm, La Crosse Financial Planning, then we will be completing your 2022 Statements for and with you. If you listen to these when they air, we’ll be in touch soon. Or maybe you’re listening to the podcast for the first time because we sent you this episode along with your Statement. Welcome. I do this every week.
If you’re not a client, perhaps you should be. 😉 If you don’t want to be, then we have templates for you to start with.
Get all 2022 Year-End Statements. Copy the balances to the Net Worth Statement. This works for all accounts and debts.
I pull Home Value from Zillow. Good as any, better than many.
I pull vehicle values from the My Car’s Value feature on KBB.com. If you trade in your cars for new ones, use the Trade-In Value. If you are the type of person who sells their own cars on Facebook Marketplace or Craigslist, then use the Private Party value.
Don’t overestimate “Personal Belongings.” You may even choose to put nothing in that category.
Net Worth is straightforward. It just takes some legwork.
We want the total gross income for the top of the statement. That’s before taxes and any deductions. Your final paystub of the year is the best place to get this, as well as any retirement savings. W2s and Tax Returns will also give you great data. Employed folk can learn most of their income, tax, and savings information from these two places.
If you’re retired, remember to use your gross Social Security, Pension, and Traditional IRA amounts. 1099s can tell you this if you don’t know, or again, your 1040 Tax Return.
If you save to Roth IRAs or HSAs outside of payroll deduction, make sure you grab those numbers for savings. If you distribute from those accounts, make sure you grab those numbers. They won’t show up on your 1040, because they are tax-free.
For insurance, you can get your health insurance cost from your final paystub or Social Security statement if you have Medicare deducted from there. Your Home & Auto insurance likely doesn’t renew on January 1st, but the last annual statement will suffice. Same for any Life, Disability, or Umbrella insurance.
In our Cash Flow Statement template, there is a section for taxes. The statement will do some dirty math for you, but you should really pull those numbers from your tax return to see how much you are paying in taxes. Again, if you are a planning client of ours, we’re doing your taxes, and we will do this for you.
Grab the templates above, carve out an hour, and study your finances. What you learn could blow your mind!
Cash Flow is the Past. It tells you where you’ve been. Net Worth is the Present. It tells you where you are. What about the future?
A Budget tells you where you are going. Don’t just see where your money went; tell it where to go! We are going to spend a couple of weeks on budgeting. If you’re groaning inside, stop right now! Budgeting, done right, is one of the most powerful things you can do. In a crazy world where you can’t control the economy, the stock market, or politics, you can at least control your money. We’ll discuss why doing it the right way is so important, easy, and fun!
Don’t believe me? Stay tuned.
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This article is educational only and is not intended to be investment, legal, or tax advice or recommendations, whether direct or incidental. Again, this is not investment advice. Consult your financial, tax, and legal professionals for specific advice related to your specific situation. Never take investment advice from someone who doesn’t know you and your specific situation. All opinions expressed in this article are those of the people expressing them. Any performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be directly invested in.