Keeping track of your personal net worth allows you to always have a firm grip on the reality of your financial situation. Figuring out your net worth is also a great asset to have when it comes to obtaining larger amounts of credit, buying a home, or investing.
To forecast your cash flow, you'll need to gather together a few items. You will need the actual bank balances in checking, savings, and money market accounts and the initial dollar amount you paid for stocks and the amount of shares you own. If you have certificate of deposits, you'll need the balance of those accounts as well. You'll also need to make a complete list of all your assets. Remember to list an asset even if you owe money on it. For example, your house might be worth $300,000; you will list what you still owe on it on your liability side of your cash forecasting. If you have an antique toy train collection that you own and it's worth is $10,000, list that too.
On your spreadsheet, list all your cash and assets. Next, list all of your liabilities and include monthly expenses such as utilities, food, clothing, and entertainment expense. Once you've listed your cash, assets, and all your liabilities, your spreadsheet will show your net worth. For example, if the total asset side is $100,000 and the total liability side is $50,000, your net worth is $50,000. Personal net worth can fluctuate, so keeping a spreadsheet that will calculate new entries or delete old entries is an effective tool.
