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Net Worth Statement – Part IV
By JLP | December 5, 2005
My last post in this series finished up the assets side of the net worth statement. Now it is time to look at liabilities.
A liability is something you owe, either now or later. A liability takes away from your net worth.
Liabilities are usually classified as either short-term or long-term. Examples of short-term liabilities are:
- Credit card debt
- Utilities
- and any other debt that must be paid off in less than a year
Long-term debt is debt that is usually paid off in more than a year. These include items such as:
- Auto loans
- Student loans
- Home mortgage
- and any other large purchase
For the most part, the less debt you have, the better. However, there are times when debt is necessary. I don’t know a whole lot of people who can pay cash for a home!
Next time I’ll put this all together in a model net worth statement so that you can see how it all works together. Until next time, feel free to familiarize yourself with the other related posts:
Topics: Financial Planning, Net Worth Statement | 1 Comment »
October 27th, 2006 at 9:54 pm
Would one define insurance deductables as a long term (yet to occur) liability?
…wanting the “networth” to be as meaningful as possible, I’ve defined such things as auto,medical&home insurance deductables in addition to normal every day expenses.
Reasons being: accident occurs, until the deductable is paid, the insurance won’t kick in. …follow my logic, if it’s slightly off topic, forgive me; but I think you understand my question and intent.