Tracking Your Progress Keeping good personal records makes budgeting and long-range planning easier. Your records also make it easier to prepare income tax returns, credit applications, and other financial forms. You should keep five types of personal records: Income and expenses records Net worth statement Personal property inventory Tax records Other miscellaneous documents Chapter 4 © 2016 South-Western, Cengage Learning
Income and Expenses Records Examples of income records W-2 forms Statements from banks Statements from investment companies Examples of expense records Receipts listing charitable contributions Medical bills Receipts for work-related expenses Chapter 4 © 2016 South-Western, Cengage Learning
Net Worth Statement Assets – Liabilities = Net worth A net worth statement shows a person’s net worth based on his or her assets and liabilities. Assets are items of value that a person owns. Money or debts owed to others are called liabilities. When you subtract liabilities from assets, the difference is known as net worth. Assets – Liabilities = Net worth Chapter 4 © 2016 South-Western, Cengage Learning
Net Worth Statement Assets Liabilities Checking account $500 Allison Jacobs January 1, 20— Assets Liabilities Checking account $500 Loan on car $1,800 Savings account 900 Loan from parents 300 Car value 3,000 Total liabilities $2,100 Personal property 5,000 Net Worth Total assets $9,400 Assets minus liabilities $7,300 Total liabilities and net worth These two numbers must be the same. Chapter 4 © 2016 South-Western, Cengage Learning
Solvent vs. Insolvent Solvent = Good financial standing; positive. Assets are greater than liabilities. Insolvent = Poor financial standing; negative. Liabilities are greater than assets. Chapter 8
Personal Property Inventory A personal property inventory is a list of the valuable items you own, along with their purchase prices and approximate current values. Personal property includes anything of value that you own, except real estate—clothing, furniture, appliances, and so forth. Chapter 4 © 2016 South-Western, Cengage Learning
Personal Property Inventory (continued) Chapter 4 © 2016 South-Western, Cengage Learning
Tax Records All taxpayers should keep copies of their tax records for at least three years after they file their tax returns. Tax records include the tax return itself (a copy of the signed form), W-2 forms, and other receipts verifying income and expenses listed on each return. Keep tax records in a safe place in case of an audit. Chapter 4 © 2016 South-Western, Cengage Learning
Other Records Lists of credit card numbers Car titles Insurance policies Birth certificates Marriage certificates Wills Passports Chapter 4 © 2016 South-Western, Cengage Learning