Look at the Big Picture of Your Finances

Physician's Money DigestNovember 2005
Volume 12
Issue 15

We all have goals and dreams, and youknow it's important to plan financially forthe things you want for both yourself andyour family. But before you start creating a strategyfor investing your money, it is important to evaluateyour current financial status. One of the best ways todo this is by creating a net worth statement.

A net worth statement looks at the big picture ofyour financial situation by breaking down yourfinances into segments and showing you the net valueof your assets. Each segment tells you about yourcurrent financial position and may allow you to identifyissues or areas that need to be addressed whenstructuring your financial plan.

Organizing the Facts

The best way to get started is by listing all yourassets, including cash in the bank or money marketaccounts, stock or bond holdings, life insurancepolicies, and retirement accounts. By taking a comprehensivelook at all of your holdings, you will beable to better determine how much is liquid. Youcan then decide if you would like to move yourmoney to investments such as an IRA or other taxdeferredvehicle, which can potentially help yourcash accumulate more quickly, instead of just gatheringdust in your wallet.

Regardless of where they are held, listing all ofyour assets also allows you to see if your investmentsare properly allocated and diversified. For example,you can evaluate whether or not you hold the propermix of corporate and municipal bonds, as well asdomestic and international equities.

Understanding Real Estate Assets

It is also important to get a good view of any realestate property you own, especially personal propertysuch as your home. This can help you focus onthings like the amount of insurance coverage youhave and whether it is enough. You should considerwhether you have adequate life insurance to coverpossible estate taxes and other expenses shouldsomething happen to you or your loved ones.

Now that you've listed everything you have,take a look at your liabilities. This will includeitems such as your mortgage, bank or car loans,credit cards, and any other expenses. When you listyour liabilities, you may find opportunities toreduce your debts, especially those with high interestrates like credit cards.

The most basic outcome of creating this statementis that you have the opportunity to observe your networth or your total financial value. With the help ofyour financial consultant, you can use this informationto develop a well-rounded plan to work towardyour financial goals.

is vice president, investments, and a financial

consultant with AG Edwards in Hillsborough, NJ. He welcomes

questions or comments at 800-288-0901, or visit www.ag

edwards.com. This article was provided by AG Edwards & Sons,

Inc, member SIPC.

Joseph F. Lagowski

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