ICFE eNEWS #15-14 - May 26th 2015
"What Is Your Money Mind? Is it Accumulation or Consumption?"
How to Develop the Big Picture of your Financial Life
RELEASE: May 2015
CONTACT: Paul S. Richard, ICFE President
San Diego, CA. What is your "Money Mind?" asks the nonprofit Institute
of Consumer Financial Education, (ICFE) based in San Diego, CA.
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 saver.
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
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
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 your plan.
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 under
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 unreported
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, I
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 sheet),
Dealing with creditors,
Steps to take to reduce indebtedness,
How to spend smarter for household and grocery items and a
"Spender's Profile" which helps people identify dangerous spending
ICFE eNEWS is available FREE upon request by visiting the ICFE's
and filling out the contact form, selecting "Yes" for "Add to Mailing List."
Please pass this eNEWS on to your peers and interested others and
invite them to subscribe for free. Also, visit the ICFE's new Web site:
Paul S. Richard
President - Executive Director
Institute of Consumer Financial Education (ICFE)
ICFE - Institute of Consumer Financial Education -