Money IN/Money OUT INSTRUCTORS' GUIDE (NOTE: For use in a series of six sessions. If you have only four sessions, use session guide 5 for the fourth and final lesson, but include the net worth statement from this session.)

Session Four: Where Are You Today?

GOAL: To motivate participants to complete a dated net worth statement every year.

Learner Objectives

Participants will be able to:

• Explain what assets and liabilities are
• Complete a dated net worth statement for their personal financial situation
• Understand that a net worth statement should be done periodically to measure progress toward financial goals
• Recognize that individuals can increase their net worth by reducing debt and saving regularly

Materials Needed

• 4-a How much Are You Worth? handouts (for single persons)
• 4-b How Much Are You Worth? handouts (for couples)
• 4-c Personal Property Inventory handouts
• 4-d Example of completed net worth statement transparency (not included)
• Calculators (if available)
• Overhead projector, if using transparencies
• Pens or Pencils

1. Getting Started.

Observe the watches of the participants and ask to borrow a watch from someone for a few minutes. (Choose someone with a non-digital watch for best results.) After you have the watch, conceal it in your hand or in a box and explain that you will test the owner's powers of observation. (Other participants can play along by covering or removing their own watches.)

Assume that you have lost you watch and I have found it. I must make sure the watch is yours by asking these questions:

• What brand of watch is it?
• What color is the face?
• Are there any words printed on the face?
• What style are the numbers on it? (Roman or Arabic?)
• Are there 12 numbers on it? If not, which numbers are on the face?
• Does the watch have a second hand?
• What color are the hands?
• Add other pertinent questions.

Chances are, the owner can not totally and accurately recall details of his or her own timepiece. If the participants played along, did they do any better?

2. A reality check.

Most of us would have difficulty describing our own watches-something we look at dozens of times a day. Describing our personal finances-something we make decisions about every day-is even more difficult.

You make countless decisions about how to use your money. But how do you decide if you are putting money to its best use? How do you get what you want and need from your money? Do you know what you are worth? Do you want to increase your net worth?

You can answer these questions by completing a net worth statement. Distribute copies of How Much Are You Worth? for single persons (4-a) and couples (4-b). Explain that it is simply a comparison of the value of what you OWN (assets) and the value of what you OWE (liabilities) on a specific date.

The difference between assets and liabilities is your "net worth." If your assets are greater than your liabilities, you have been doing a pretty good job of controlling your finances and have a positive net worth.

If your liabilities are greater than your assets (a negative net worth), it is a sign that you are in trouble. This is valuable information and having this knowledge is the first step in getting out of trouble. Also remember that net worth is only a snapshot of where you are on the date you make the calculations, and your net worth could be quite different in future years.

Net Worth should be calculated at least once a year and the results compared to previous statements to see how much progress you have made. Some financial planning experts recommend that you do it in November so that you are more likely to keep a lid on holiday spending! Other professionals recommend doing it on December 31, along with tax calculations. You should also do a net worth statement any time there is a major change in your financial situation--such as receiving a bonus check or an inheritance, or making a major purchase such as a house, real estate, mobile home or new car. Take a closer look at what is involved.

3. Explanation of Assets.

Think of assets as items you own, anything that can be converted to cash. Include cash on hand as well as in deposit accounts. Include the value of all investments on the given date. Include cash surrender value of insurance policies. Use tax valuation or other measures of value for real estate. Estimate the current value of personal property. You may find it helpful to keep a personal property inventory to help you figure out the current market value of your possessions.

Distribute copies of Personal Property Inventory (4-c). (Tell participants to make enough copies for their possessions.) Start with your most valuable items such as furniture, jewelry, electronic equipment, cameras, and appliances. It may help to do this room by room. For each item, try to list the purchase cost, the current market value (the amount for your Net Worth Statement), and the replacment cost (for insurance purposes if an item is lost or damaged. Taking pictures or a video is also helpful in making insurance claims). Once you have done an inventory, keep a copy of it in a safe place and try to update it as you acquire additional possessions, as the value of possessions changes over time. Be practical and give each item a realistic current market value--what someone would actually pay you for it today. It may be worth the fee to have some items appraised.

Notice the columns on the form for couples (4- b). You can do a net worth statement for yourself and your spouse individually as well as jointly-indicating which assets belong to each person. You may find it easier to complete a joint/total net worth statement first. But how you own property is important information. Check the law for your state. For North Carolina, see Property Ownership (from the Planning Your Estate web site-http:www.ces.ncsu.edu/depts/fcs/estates/index.html).

4. Explanation of Liabilities.

Think of liabilities as what you owe--loans, credit accounts, taxes, unpaid bills, and pledges. You can calculate any separate liabilities for yourself and your spouse, as well, but be sure to do a joint/total statement as well.

5. Calculation of Net Worth.

The bottom line is the difference between assets and liabilities. Whatever the difference is today, one of the long-term goals of financial planning is to increase your assets and reduce your liabilities. It should be obvious that saving more and paying off your debts will increase your net worth.

6. Summarize.

A net worth statement can be a jolting reality check. Take it as a wake up call!
Display or distribute one or more sample completed net worth statements (4-d).

7. Challenges.

Take the time this week to prepare a net worth statement. File your dated net worth statement for comparison with future net worth statements. Continue keeping a record of your spending.

8. Preview

At the next session you will have a month's information and you will be able to get organized and begin planning ways to increase your net worth!

---

Other Resources

• Department of Family & Consumer Sciences
• Family Resource Management
• North Carolina Cooperative Extension Service

Return to Money IN/Money OUT Home Page

This page (http://www.ces.ncsu.edu/plymouth/mimo/session4net.html) was created by Jan Lloyd (Extension Area Specialist, Family & Consumer Sciences), Michele Simpson(Program Assistant, Famiy & Consumer Sciences), and Bruce A. Emmons(Area Specialized Agent, Information Management).

Date Created April 17, 2000.
Last revised on June 26, 2001.

Published by North Carolina Cooperative Extension Service

Distributed in furtherance of the Acts of Congress of May 8 and June 30, 1914. Employment and program opportunities are offered to all people regardless of race, color, national origin, sex, age, or disability. North Carolina State University at Raleigh, North Carolina A&T State University, U.S. Department of Agriculture, and local governments cooperating.