ICFE eNEWS #15-14 - May 26th 2015
Is Your Money Mind? Is it Accumulation or Consumption?"
San Diego, CA. What
is your "Money Mind?" asks the nonprofit Institute of Consumer Financial
Education, (ICFE) based in San Diego, CA.
Develop the Big Picture of your Financial Life"
Have you ever wondered just how well you have done at hanging on
to some of your hard working money over your entire working years?
Looking at that aspect of your finances can be very revealing. It
can also help you determine your Money Mental: i.e. spender verses
Pictures of your finances capture your situation at a particular
date. They do not need to be complex or loaded with details. The
basic numbers to determine are:
1. Assets - cash, stocks, bonds, etc
2. Liabilities - debts, car loan, mortgage, credit card bills, etc.
3. Net Worth - the difference between assets and liabilities -
a/k/a the difference between what you own versus what you owe.
This exercise demonstrates very quickly the need to maintaining
good records, both income and expenses. Keeping records is as easy
as putting everything in monthly envelopes. Most sources of financial
data will be found in savings passbooks, checkbooks registers, paycheck
stubs and monthly receipts from household and other expenses.
How To Develop The "Big Picture"
Step One: Make a list of assets:
Helpful hints on determining the current value of your assets.
1. Select a date (usually as of the first or end of a month or year).
2. If your date is the end of a month/year and a payment may be
due on the first of the next month/year, it will not affect your
calculation, since the payment is not due on the last day of the
current month/year - e.g. the date of your financial picture.
3. Maintain consistent dates (either beginning or end of a period)
throughout the year.
4. Keep receipts, pay stubs, etc. on a monthly basis in 12 monthly
Includes money in checking and savings accounts, any money due from
a stockbroker for securities sold before the statement, but not
yet received, interest due on savings etc.
List the value of any stocks, bonds or other securities, any loans
due you from family members or others - which you are likely to
collect; prepaid utility deposits, rent or security deposits. In
some cases, deposit holders pay interest, if they don't, ask them
to, it doesn't cost to ask.
Life Insurance (cash surrender value)
Not all life insurance policies build cash value, term insurance,
for example does not. Ordinary life insurance, whole life insurance,
annuities, and some forms of variable or adjustable life insurances
do build cash value. If you have borrowed from life insurance policies,
the amount to put on the net worth statement is cash surrender value
after the loan.
If you are participating in a retirement or pension plan through
your employer and you are fully vested, (which means that should
you terminate your employment, you may have a certain amount that
has been paid into your retirement plan that is yours to keep).
Vesting varies from plan to plan, but usually is occurs in no less
then five years and no more than ten years of employment or your
participation in the plan. If you have paid additional money into
your pension plan and terminate your employment before you are vested,
the additional money you paid in is yours forever - however what
you might lose is any matching amount paid by your employer into
As a landowner you have a "fee interest" in the property. If you
own a building on leased land, you have a "leasehold interest."
A home or other building is considered an improvement to land, so
their value should be calculated separately. List the value of your
real estate at the price paid, plus any improvements (duly noted)
and any appreciation/depreciation due to inflation/deflation. State
the full value of your property on the asset side and list the amount
due on any mortgages or subsequent trust deeds will be listed separately
Furniture in your home and other locations may be listed here. It
is best to make a list of each room and then make a combined list.
Include also musical instruments, appliances, tools, etc. Don't
included built-ins or wall-to-wall carpeting which is included in
the value of the structure. As a rule of thumb, furnishings are
about 8 percent of the value of the house.
Antiques and Collectibles
If antiques have a fair market value, one can use comparables for
determining value or have an independent appraisal completed that
will be respected by both insurers and the IRS.
Motor Vehicles (includes recreational trailers or vehicles, boats,
Cars, trucks and other motor vehicles (collectibles excepted) depreciate
(lose value) sometimes quite rapidly and the "current value" is
the amount to use. Any loan outstanding on a vehicle will be listed
under liabilities. For help in determining current value, contact
a bank or credit union loan officer who will have a "blue book"
which lists current value. Another method is to find comparisons
in local automobile dealership ads or the classifieds
Clothing and Personal Items
As a general rule, clothing and other personal items are not readily
convertible into cash (unless they are furs or jewelry, (which should
be listed separately) and therefore will NOT be included in assets.
Other items of value $100 or more may be included.
Step Two: Make a list of liabilities
Money owed to others, whether it is a home mortgage, auto loan,
credit card statement, taxes, utility bills, or a loan from a family
member is called a liability. Include every debt owed, even to family
members. If you have co-signed a loan as a guarantor for another,
it is considered a liability for you until the loan is paid, because
you promised to pay if the borrower doesn't. On monthly statements,
list the outstanding balance plus any charge purchases made since
the last statement.
If you are not self-employed and employed by others it is not likely
you will have any income taxes payable due to the withholding tax.
If this is not the case, then include any taxes due. If necessary,
use your tax bracket from last year and estimate the tax on any
Step Three: Calculate Net Worth
The totals calculated in step one: listing assets and also in step
two: listing liabilities are transferred in step three to the Net
Worth Statement. The picture (or summary) is developed by subtracting
the total liabilities from the value of all assets. If the value
of liabilities is greater than assets, the difference is called
negative net worth. If the assets are greater than liabilities,
the difference is called positive net worth. If the value of both
liabilities and assets are identical, the net worth is referred
to as zero net worth. See examples below of possible net worth outcomes.
[Examples of three possible outcomes]
Example of Positive Net Worth
Total Assets: $150,000.00
Total Liabilities: ($90,000.00)
Net Worth: +$60,000.00
Example of Negative Net Worth
Total Assets: $100,000.00
Total Liabilities: (110,000.00)
Net Worth: -$ 10,000.00
Example of Zero Net Worth
Total Assets: $100,000.00
Total Liabilities: (100,000.00)
Net Worth: Zero
NET WORTH - How To Look At The Big Picture
Total (or estimate) all money earned since entering the workforce:
Income total working years $__________________
Number of years worked: ________
Average earnings per year $____________________
Net worth is: $____________________
Determining Your Money Mental: Spender or Saver?
Compared to total income earned since beginning work, the net worth
a) _____ Less than 10% of total earnings.
b) _____ Between 10% and 50% of total earnings.
c) _____ Between 50% and 100% of total earnings.
d) _____ Greater than total earnings.
When compared: net worth to total income over my working years,
a) _____ I have done OK.
b) _____ I am wondering where did all the money go?
c) _____ I think I better quit spending and start saving.
d) _____ I don't have a positive net worth.
e) _____ And, I need to pay off some debt, and fast.
For help with "Mending Spending" and finding more money for savings,
follow these links:
Ways to improve spending practices,
How to set up and implement a spending-plan (plus a budget work
Dealing with creditors,
Steps to take to reduce indebtedness,
How to spend smarter for household and grocery items and
"Spender's Profile" which helps people identify dangerous spending
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Also, visit the ICFE's new Web site: StudentDebtHelp.org
Paul S. Richard
President - Executive Director
Institute of Consumer
Financial Education (ICFE)
About the ICFE:
The Institute of Consumer Financial Education (ICFE) was founded in 1982 by the late Loren Dunton (creator of the Certified Financial Planner (CFP) designation). The ICFE is dedicated to helping consumers of all ages to improve their spending, increase savings and use credit more wisely.
The ICFE is an award winning, nonprofit, consumer education organization that has helped millions of people through its education programs and Resources. It publishes the Do-It-Yourself Credit File correction Guide, which is updated annually. The ICFE has distributed over one million Credit/Debit Card Warning Labels and Credit/Debit Card Sleeves world wide.
The ICFE became an official partner with the Department of Defense/Financial Readiness Campaign in June of 2004.The ICFE was an active partner in the California Student Debt Resource Awareness Project (CASDRAP) which resulted in a new web site: (studentdebthelp.org). CASDRAP disbanded in 2010, shortly after the web site project was completed. In 2011 the ICFE assumed the single sponsorship of the (studentdebthelp.org) web site and is now responsible for its content and operation.
The ICFE is also an on-line help for consumers who spend too much. ICFE's spending help was featured in PARADE Magazine in the Intelligence Report section. The money helps and tips are from the ICFE's Money Instruction Book, our course in personal finance.
Visit the ICFE's other web sites at: www.financial-education-icfe.org and studentdebthelp.org. Both sites helps consumers and students with mending spending, learning about the proper use of credit, budget and expense guidelines, how to set up and implement a spending-plan and also how to access financial education courses and how to teach children about money. Other ICFE services include: Ask Mr. G, a free eNews, and an online resource center for students, parents and educators, plus financial education learning tools and a book store.