Cataloging your household assets is an important step toward understanding your total net worth. Once you know your net worth, you’ll be able to track where you are along the road to your long-term financial goals. Although you may think that tracking assets is something only the wealthy need to worry about, it’s an important practice for everyone who has personal possessions of value. Tracking the worth of your household assets can also come in handy when dealing with your insurance company.
Types of Assets
An asset is anything that has monetary value, which means you can sell it and convert it to cash. For most people, real estate is their most valuable asset. Besides a home, other assets include cars, boats and household items like furniture, electronics, clothing and jewelry. Among financial experts, real estate and other possessions that must be sold to raise money are known as fixed assets. Your cash is also an asset, as are checking and savings accounts and investments like stocks and bonds. These assets are known as liquid assets because they can be converted to cash relatively quickly.
Determining Your Net Worth
Calculating your net worth can be as simple as adding up the value of your assets and then subtracting your liabilities. Include all your cash, the money in your bank accounts, the value of your home and car, and the estimated value of all your other personal property. When you list your liabilities, include the remaining balances on your mortgage, car loan, student loans and credit cards. The difference between your assets and your liabilities is your net worth.
Protecting Your Assets
You may spend years paying for some of your biggest assets, especially your home. It’s important to protect your investments by documenting them and insuring them when appropriate. Create an inventory of your major purchases, their purchase prices and their current value; it will come in handy in case of theft, fire, flood or some other catastrophe. Make copies of the list and put one with your other important records in a safe or bank deposit box.
Insuring Household Assets
Knowing the value of your assets is a necessary step toward getting them insured. If you own a home or have a mortgage, homeowners insurance is a necessity. You should also consider separate insurance policies for any antiques or collections that would be difficult to replace if destroyed or stolen. When shopping for insurance, be aware that not all policies are the same when it comes to coverage and deductibles.
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