A net worth statement is a one-page snapshot of your finances on a specific date: it lists everything you own, lists everything you owe, and subtracts the second from the first to give you a single number. Lenders, courts, and federal agencies ask for one before approving loans, dividing property, or verifying that you qualify for certain investments. You can also build one yourself, and doing it once a year is the clearest way to see whether your finances are actually improving.
What Goes on the Statement
The layout is simpler than the name suggests. Three sections: assets at the top, liabilities in the middle, net worth at the bottom. Formal versions like the SBA’s Personal Financial Statement (Form 413) break each side into specific line items and add supplemental pages for stocks, real estate, notes payable, and life insurance.1U.S. Small Business Administration. SBA Form 413 – Personal Financial Statement An informal version for your own planning can be a two-column list on a single sheet. Either way, the categories are the same.
Assets
Assets are anything you own with monetary value. They usually group by how quickly you could turn them into cash:
- Cash and bank accounts (checking, savings, money market funds)
- Investment accounts (stocks, bonds, ETFs, mutual funds, CDs)
- Retirement accounts (401(k)s, IRAs, pensions, annuities)
- Real estate (primary residence, rentals, vacation homes, land)
- Vehicles and personal property (cars, boats, jewelry, art)
- Business interests (stakes in closely held companies, partnerships, LLCs)
- Other assets (cash surrender value of life insurance, money owed to you)
For an informal exercise, skip items that would sell for very little. When a lender or agency hands you a specific form, list everything the form asks for. The SBA’s form, for example, asks you to list every automobile by year, make, and model with no minimum value threshold.1U.S. Small Business Administration. SBA Form 413 – Personal Financial Statement
Liabilities
Liabilities are every debt you owe, regardless of whether you think of it as good debt or bad debt:
- Mortgages (outstanding principal balance)
- Auto loans
- Student loans (federal and private)
- Credit card balances (the full statement balance, not the minimum payment)
- Other installment loans, including personal loans and home equity lines of credit
- Unpaid federal, state, or local taxes
- Medical bills and other accounts payable
Use the outstanding principal balance for each debt, not the total you’ll pay over the life of the loan. The number you want is what it would cost to clear the debt today.
If any asset or debt is shared with another person, note that with a short explanation of the joint ownership.
How to Value What You Own
Each asset should be listed at fair market value: the price a willing buyer and a willing seller would agree on, with neither being forced to act and both having reasonable knowledge of the facts.2Internal Revenue Service. Publication 561 – Determining the Value of Donated Property In practice, that means real pricing data rather than what you paid or what you hope something is worth.
Bank and brokerage figures come straight from your most recent statement. Publicly traded stocks and funds use the closing price on the date you pick. The judgment calls start with assets that don’t have a ticker symbol.
Real Estate
A professional appraisal is the most defensible number and typically costs $300 to $900 for a standard residential property. If no lender is requiring an appraisal, a comparative market analysis from a real estate agent or recent sales of similar homes nearby is a reasonable estimate. The IRS standard applies either way: what would the property sell for in a normal arm’s-length transaction?2Internal Revenue Service. Publication 561 – Determining the Value of Donated Property
Vehicles
Use a recognized pricing guide like Kelley Blue Book. The private-party sale value is generally the right figure. It reflects what you’d actually receive selling to another person, rather than the lower trade-in value a dealer would offer or the higher retail price a dealer would charge.
Business Interests
Valuing a privately held business is the hardest line on any personal statement. A small business with simple operations might be valued using a multiple of annual earnings or revenue. More complex businesses often need a formal valuation from a CPA or specialized valuation firm, which can cost anywhere from a few thousand dollars into six figures depending on size and complexity. If the statement is going to a lender or a court, expect them to scrutinize this number closely.
The Pre-Tax Retirement Account Problem
This is where most personal statements quietly overstate reality. Every dollar you withdraw from a traditional 401(k) or IRA in retirement will be taxed as ordinary income, so $400,000 in a traditional account is not $400,000 of spending power. A Roth account with the same balance comes out tax-free.
Standard practice, including on the SBA form, is to report the full balance without subtracting estimated future taxes. The reasoning is practical: nobody knows your future tax rate, when you’ll withdraw, or what tax law will look like decades from now. If you’re using the statement to plan for retirement rather than to satisfy a lender, run a second calculation that discounts traditional retirement balances by your expected marginal tax rate. Two people with identical net worth on paper can be in very different positions if one holds mostly pre-tax retirement money and the other holds after-tax investments.
Contingent Liabilities
Most formal statements include a separate section for contingent liabilities: potential obligations that may or may not become real debts depending on future events. The SBA’s Form 413 lists four categories: debts you’ve co-signed or co-made, pending legal claims and judgments, provisions for federal income tax on anticipated asset sales, and other special debts. These don’t get subtracted in the main net worth calculation, but lenders review them carefully because they represent risk that could still hit you.
Doing the Math and Reading the Result
Once every asset is valued and every liability balance is recorded, total assets minus total liabilities equals net worth. A positive result means you own more than you owe. A negative result means your debts exceed what you currently own, which is common for recent graduates carrying student loans or homeowners early in a mortgage.
Negative net worth isn’t a crisis by itself. What matters is the trajectory. Someone who owes $50,000 more than they own but is steadily paying down debt and building savings is in a very different position than someone whose negative balance is growing. The real value of the exercise shows up when you repeat it, at least once a year, and compare the figures. A rising number confirms your decisions are working. A flat or declining number tells you something needs to change.
When You’ll Need One
Loan Applications
The SBA requires a Personal Financial Statement from applicants for 7(a) loans, 504 loans, disaster loans, and surety bond guarantees. The agency uses it to assess repayment ability and creditworthiness, and failing to provide the information affects the agency’s decision on the application.1U.S. Small Business Administration. SBA Form 413 – Personal Financial Statement Commercial banks and private lenders ask for similar documentation on business loans, large personal loans, and sometimes mortgage applications where income alone doesn’t tell the full story.
Estate Planning
Estate attorneys need a full picture of your assets and liabilities to draft wills and trusts. The numbers matter for federal estate tax too. For 2026, the estate tax filing threshold is $15,000,000 per individual, and the IRS values the estate using fair market value at the date of death rather than what you originally paid.3Internal Revenue Service. Estate Tax Keeping a current net worth statement makes the executor’s job easier and reduces the risk of assets being missed during probate.
Qualifying as an Accredited Investor
Federal securities law limits certain investments, including most private equity and hedge funds, to accredited investors. One way to qualify is a net worth over $1,000,000, individually or jointly with a spouse or spousal equivalent. The calculation excludes the value of your primary residence, and mortgage debt up to the home’s fair market value doesn’t count as a liability. Mortgage debt exceeding the home’s value does count against you.4eCFR. 17 CFR 230.501 – Definitions and Terms Used in Regulation D A statement with the primary residence stripped out is the standard way to document this.
Financial Aid
The FAFSA asks for the net worth of your investments and businesses, and its definitions differ from a general statement. It excludes your primary home, retirement accounts, life insurance, cash in checking and savings (reported separately), and ABLE accounts from the investment net worth figure, and it doesn’t let you use a negative value on one property to offset positive values on others.5Federal Student Aid. Net Worth of Your Investments A clear personal statement is a useful starting point, but the FAFSA number will not match it line for line.
Divorce
Courts require both spouses to file financial disclosures listing income, expenses, assets, and liabilities before marital property is divided. These disclosures function as detailed net worth statements. Hiding assets or misrepresenting values can lead to sanctions, and many divorce attorneys recommend each spouse prepare an independent statement before negotiations begin.
Regulatory Proceedings
Federal regulations require a statement of net worth from parties applying for awards of fees and expenses in certain administrative proceedings, and the statement must reflect the net worth of the applicant and all affiliates.6eCFR. 12 CFR 308.177 – Statement of Net Worth
Mistakes That Distort the Number
The most common error is stale data. A net worth statement captures a single date. Mixing a brokerage balance from January with a mortgage balance from March produces a number that doesn’t represent any real moment in time. Pick a date and pull every figure as close to it as possible.
Overvaluing real estate is the next most frequent problem, especially for homeowners anchored to peak market prices or a neighbor’s sale from years ago. Use current comparable sales. If a lender is reviewing the statement, they’ll check.
Forgetting liabilities is surprisingly easy. People remember the mortgage and the car loan but overlook a co-signed student loan for a family member, an unpaid tax balance, or an old home equity line of credit. Pull your credit report as part of the process. It will surface debts you might have missed.
Finally, watch for a double-counting problem with equity. If you list your home at $350,000 on the asset side and your $280,000 mortgage on the liability side, the math correctly captures your $70,000 in equity. If you list only $70,000 in assets and also list the $280,000 mortgage as a liability, you’ve understated your position by $280,000. Always list the full fair market value on the asset side and the full outstanding balance on the liability side, and let the subtraction do the work.