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How much are you really worth?

Microsoft founder Bill Gates is worth about $48 billion, according to Forbes magazine. Donald Trump, about $2.6 billion. Oprah slides in at $1.3 billion. And Martha Stewart is no longer in the billionaires club, but she still has a hefty $335 million or so. What do these people have that you don't? Besides a lot more spending money, that is? They know their net worth.

If you're like most people, you've never figured out your net worth. Maybe you've eyeballed your assets; added up the house, the 401(k), the brokerage account and the cars, and then subtracted the mortgage, the car loan and a few other things and come up with a roundabout figure, but you need to do better than that.

David Marotta, of Marotta Asset Management in Charlottesville, Va., says computing a net worth statement is one of the first things he has prospective clients do.

"Even if they don't sign up for our services, it's a valuable thing to do. Sometimes people find all their net worth is in the house or the retirement account. This gives them a feel for their liquidity and then they understand why they can't do some of the things they want to do."

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While equity in a home is definitely part of a person's net worth, Marotta doesn't like to include home equity in determining how much a retiree can spend. Some people might opt to do a reverse mortgage in retirement and draw out those assets, but Marotta says he's found it's best to reserve the equity for purchasing a retirement home or even a unit at an assisted living facility or a nursing home.

Too much net worth in a retirement portfolio means you have a lot less flexibility to do things pre-retirement. The assets may be adequate for retirement, but you're strapped for cash until then.

After you crunch the numbers and determine your net worth, don't expect to break out into a grin when you see your bottom line. Many people get quite discouraged, notes Marotta.

"Some haven't saved as much as they thought and they're not making progress to their goals. Others, we need to tell them what their goals should be and then they realize that their net worth has to be significantly higher to meet those retirement goals."

Net worth is total assets minus total liabilities. You might be living in a modest house and driving an economy car and have a higher net worth than your cousin who lives in a big house and has two BMWs in the garage. It's the difference between what you own and what you owe.

Experts advise calculating your net worth at least once a year. It can be a bit of a hassle the first time pulling together all the information, but it should be easier in succeeding years. Certified financial planner John Sestina, president of John E. Sestina and Company, Columbus, Ohio, says you'll likely find that there are more benefits than simply knowing your bottom line.

"It's not just the paper that's valuable; it's the process of putting it together. You might find a certificate of deposit you'd forgotten about, or an asset that still has your ex-wife as beneficiary. It's touching on who you are financially and then making some changes that are beneficial."

-- Updated: Dec. 7, 2004





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