page 2.2.3 statement of financial position · pdf filestatement of financial position answer...

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© Take Charge Today – August 2013 – Statement of Financial Position Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona

RECOMMENDED GRADE

LEVELS AVERAGE TIME TO COMPLETE

EACH LESSON PLAN IS DESIGNED AND CONTINUALLY EVALUATED

“BY EDUCATORS, FOR EDUCATORS.” THANK YOU TO THE

FOLLOWING EDUCATORS FOR DEVELOPING COMPONENTS OF

THIS LESSON PLAN.

10‐12

Anticipatory Set & Facilitation:

75 minutes

Conclusion/Assessment Options:

10‐60 minutes

Time does not include optional items.

Tracey Newman, Family and Consumer Sciences Educator, Ste. Genevieve, Missouri

Michelle Keech, Business Educator, Tremont, Illinois

Shelly Stanton, Business Educator, Billings, Montana

Kathie Beck, Family and Consumer Sciences Educator, Holland, Michigan

NATIONAL STANDARDS LESSON PLAN OBJECTIVES

The curriculum is aligned to the following national standards: National Standards for Financial Literacy American Association of Family and Consumer

Sciences Council for Economic Education National Business Education National Jump$tart Common Core English Language Arts

Upon completion of this lesson, participants will be able to: Describe the importance of net worth Compare the difference between income and net

worth Explain why a Statement of Financial Position is an

important financial planning tool Create a Statement of Financial Position

MATERIALS

MATERIALS PROVIDED IN THIS LESSON PLAN

MATERIALS SPECIFIC TO THIS LESSON PLAN

BUT AVAILABLE AS A SEPARATE DOWNLOAD MATERIALS TO ACQUIRE SEPARATELY

DEPENDING ON OPTIONS TAUGHT

Statement of Financial Position Word Grid 2.2.3.A1

Tori’s Statement of Financial Position 2.2.3.A2

Net Worth Knowledge 2.2.3.A3 Cody’s Statement of Financial Position

2.2.3.A4 Chuck and Wendy’s Statement of

Financial Position 2.2.3.A5 Ed and Mary’s Statement of Financial

Position 2.2.3.A6 Financial Position Throughout the Life

Cycle 2.2.3.A7 My Statement of Financial Position

Statement of Financial Position Answer Key 2.2.3.C1

Statement of Financial Position Excel Template 2.2.3.E3

Statement of Financial Position PowerPoint Presentation 2.2.3.G1

Managing Your Money Unit Multiple Choice Test Bank 2.2.0.M1 & C1

None

STATEMENT OF FINANCIAL POSITION Advanced Level

www.takechargetoday.arizona.edu

Material List Continued on Page 2

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2.2.3.A8 Statement of Financial Position

Vocabulary List 2.2.3.E1 Statement of Financial Position

Template 2.2.3.E2 Statement of Financial Position

Information Sheet 2.2.3.F1

Statement of Financial Position Note Taking Guide 2.2.3.L1

RESOURCES EXTERNAL RESOURCES

External resources referenced in this lesson plan: Kelley Blue Book: www.kbb.com

TAKE CHARGE TODAY RESOURCES

Similar lesson plan at a different level: None available

Optional lesson plan resources: Card Sort Active Learning Tool 3.0.9

Technology Integration Options Active Learning Tool 3.0.50

Income and Expense Statement Lesson Plan 2.2.4

Spending Plans Lesson Plan 2.2.5

Setting Financial Goals Lesson Plan 2.1.4

Vocabulary Reinforcement Activities Active Learning Tool 3.0.36

CONTENT EDUCATOR MATERIALS PARTICIPANT READING

Materials to support educators when preparing to teach this lesson plan are available on the Take Charge Today website.

Statement of Financial Position Information Sheet 2.2.3.F1

OPTIONAL INSTRUCTIONThis lesson is designed to be taught as a stand‐alone lesson. However, background content knowledge from the

following lesson plans is directly related to this lesson and may be helpful for participants.

Setting Financial Goals Lesson Plan 2.1.4 Income and Expense Statement Lesson Plan 2.2.4 Spending Plans Lesson Plan 2.2.5

LESSON FACILITATION

PREPARE Visual indicators to help prepare the lesson

INSTRUCTInstructions to conduct the lesson facilitation

CUSTOMIZE

Potential modifications to lesson facilitation

VOCABULARY ACTIVITY

Word Grid Approximate time: 10 minutes prior to instruction and 10 minutes at the end Materials to prepare for the vocabulary activity:

http://takechargetoday.arizona.edu/lessonplans/technology-integration-options

http://takechargetoday.arizona.edu/lessonplans/vocabulary-reinforcement-activities

http://takechargetoday.arizona.edu/lessonplans/card-sort

https://takechargetoday.arizona.edu/lessonplans/income-and-expense-statement

https://takechargetoday.arizona.edu/lessonplans/spending-plans

https://takechargetoday.arizona.edu/lessonplans/setting-financial-goals




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1 Statement of Financial Position Word Grid 2.2.3.A1 per participant Before instruction: 1. Provide each participant with one copy of the Statement of Financial Position

Word Grid 2.2.3.A1. 2. Complete the directions for “Before the lesson.” An example is provided.

After instruction: 3. After the lesson is complete, reinforce learning gained by completing the

directions for “After the lesson.”

ANTICIPATORY SET

Who is wealthier? Approximate time: 2 minutes Materials to prepare: Statement of Financial Position PowerPoint Presentation 2.2.3.G1 Technology Integration Options Active Learning Tool 3.0.50 for reference 1. Present the Statement of Financial Position PowerPoint Presentation 2.2.3.G1. 2. On slide 2, ask participants to vote on who they think is wealthier, Ian or

Mitchell. 3. If desired, add up the votes to compare the results at the end of instruction.

This could be completed in a variety of ways: a. Have participants raise their hands to cast their vote. b. Use software on an interactive whiteboard or a classroom response

system. c. Use a polling or brainstorming/discussion website. Refer to the

Technology Integration Options Active Learning Tool 3.0.50 guide for specific websites.

4. Tell participants that they will learn more about wealth, net worth, and income throughout the lesson.

RECOMMENDED FACILITATION

Approximate time: 70 minutes Materials to prepare: 1 Statement of Financial Position Note Taking Guide 2.2.3.L1 per participant 1 Tori’s Statement of Financial Position 2.2.3.A2 per participant 1. Pass out one Statement of Financial Position Note Taking Guide 2.2.3.L1 to each

participant. a. If the note taking guide is not used, consider providing each participant

with a copy of Tori’s Statement of Financial Position 2.2.3.A2 to reference throughout the presentation.

Part 1: What is Net Worth? 2. Slide 3: Net Worth = Wealth

a. Net worth is the objective measure of financial wealth.

Discussion questions are indicated by a question mark icon throughout the PowerPoint.

Have participants highlight each section of the Statement of Financial Position as it is discussed.

Use the quiz me cards activity from the Vocabulary Reinforcement Activities Active Learning Tool 3.0.36 for the three spending lessons: Statement of Financial Position 2.2.3, Income and Expense Statement 2.2.4 and Spending Plans 2.2.5.

http://takechargetoday.arizona.edu/lessonplans/vocabulary-reinforcement-activities






https://takechargetoday.arizona.edu/lessonplans/statement-financial-position

https://takechargetoday.arizona.edu/lessonplans/statement-financial-position



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3. Slide 4: Net Worth vs. Income a. Income is money received like wages from working for pay, whereas net

worth will depend on how a person manages their income. b. A person can have a high income and low net worth or vice versa. If a

person spends all money earned and does not save any money, they may have low net worth (no matter how high their income may be).

Part 2: The Statement of Financial Position 4. Slide 5: How do you determine what your net worth is?

a. Net worth is calculated using the Statement of Financial Position. b. The Statement of Financial Position is similar to a net worth statement

or balance sheet. It is similar to a balance sheet made for businesses but is designed for individuals, families, and/or households.

5. Slide 6: Three components a. Make sure participants find each section on the statement in front of

them (either the note taking guide or sample Statement of Financial Position).

Part 3: Assets 6. Slide 7: What is an asset?

a. Ask participants if they know what an asset is and then discuss the definition.

7. Slide 8: Monetary Assets a. Assets are divided into three categories on the Statement of Financial

Position. b. Discuss monetary assets and find that section on the Statement of

Financial Position. c. Give the examples provided and then ask participants to brainstorm

other examples of monetary assets such as money owed to you by others.

8. Slide 9: Tangible Assets a. Discuss tangible assets and find that section on the Statement of

Financial Position. b. Give the examples provided and then ask participants to brainstorm

other examples of tangible assets. Other examples may include jewelry, sporting goods, clothing, furniture, boats, and campers.

9. Slide 10: How do you determine the value of tangible assets? a. The market value of tangible assets is what is recorded on the

Statement of Financial Position. b. Discuss various ways you can find the market value of tangible assets

and use the example provided to illustrate how the market value is recorded on the statement.

i. Kelley Blue Book is an example of a website that will estimate the value of an automobile.

ii. The local newspaper classifieds is a great location to determine what similar items are selling for.

10. Slide 11: Investment Assets a. Discuss investment assets and find that section on the Statement of

Financial Position.

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b. Give the examples provided and then ask participants to brainstorm other examples of investment assets. Other examples include bonds, mutual funds, and the value of investment real estate.

Part 4: Liabilities 11. Slide 12: What are liabilities?

a. Ask participants what they think liabilities are and discuss the definition. b. Give the examples provided and then ask participants to brainstorm

other examples of liabilities. Other examples include a personal loan, a loan for other items such as a camper or boat, and money owed to others such as a family member.

12. Slide 13: What is recorded in the liabilities section? a. When recording the amount for each liability, you should record what

you would pay if you were to pay the loan off in full today. b. For example, let’s say you have an automobile loan that if you were to

pay today in full you would owe $5,490. If you were to continue making payments of $180 which include interest you will pay $6,300 total. Because a Statement of Financial Position is based on a specific date, you would record what you owe today which is $5,490.

13. Slide 14: Liabilities vs. Expenses a. Bills needing to be paid are not liabilities. You are paying for the use of

an item, not paying back money owed. b. Refer back to the example on slide 13 to explain that the $5,490 owed

on the automobile loan is the liability and the $180 monthly payment is the expense.

Part 5: Net Worth 14. Slide 15: Calculating Net Worth

a. Refer to the bottom line of the Statement of Financial Position that indicates: net worth = total assets – total liabilities.

15. Slide 16: Net Worth – Your Personal Financial Thermometer a. Net worth is like your personal financial thermometer, because it

provides a number that can measure your “financial temperature.” 16. Slide 17: How can you increase net worth?

a. If you want to increase your net worth you can increase your assets, decrease your liabilities, or complete a combination of both.

b. In order to increase assets or decrease liabilities you will want to make changes regarding how you manage your money.

17. Slide 18: Money Management Tools a. In addition to the Statement of Financial Position, there are two other

money management tools that will help you manage your money: the Income and Expense Statement and the Spending Plan.

b. These three money management tools work together to help you objectively evaluate your past, present, and future financial decisions to work towards reaching the net worth level desired.

18. Slide 19: Your present self impacts your future self a. Remind participants to keep their future in mind when making financial

decisions. Think about how financial decisions will affect future net worth.

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19. Slide 20: So who is wealthier? a. Refer back to the anticipatory set. Show participants Ian and Mitchell’s

Statements of Financial Position and ask them to determine if they agree with their initial vote of who is wealthier.

b. If desired, complete the vote again. c. Discuss how even though Ian has a lower income, his net worth is

higher because he has more assets than liabilities and therefore is wealthier.

20. Slide 21: Discussion a. Use the questions provided to discuss Ian and Mitchell’s scenario. You

may need to refer back to Ian and Mitchell’s Statements of Financial Position on slide 20 after introducing a question. Possible discussion points include:

i. Do you think Ian is making any trade‐offs to have higher net worth than Mitchell even though he has a lower income?

1. Ian’s car and home are worth less than Mitchell’s so he may be making a trade‐off to have lower valued assets in order to have less debt.

2. Discuss how Mitchell may appear wealthier than Ethan because his automobile and house have a higher value, but on paper Ian is really wealthier than Mitchell.

ii. How could both Ian and Mitchell increase their net worth? 1. Ian could work to pay off his mortgage or college loan

faster. He could invest more in his retirement account. 2. Mitchell needs to pay off some of his liabilities,

especially his credit card debt and automobile loan. 3. Both can use other tools such as the Income and

Expense Statement and Spending Plan to help them plan how to pay off their liabilities.

iii. If Ian and Mitchell were thinking about going on vacation, how would their Statement of Financial Position guide their decision?

1. They should evaluate if they have enough liquid (monetary) assets.

2. They should consider if they feel comfortable with their current net worth and if making the decision to go on vacation today is worth reducing their net worth.

21. Slide 22: When would a person need or want to create a Statement of Financial Position?

a. When creating a Statement of Financial Position, put it in writing, because it will result in a more accurate measurement of net worth. Research has shown that individuals have a tendency to believe they owe less than they actually do or own more than they actually do. Having a written Statement of Financial Position provides a tangible record to refer to and help set financial goals.

b. It is recommended to create a Statement of Financial Position approximately once per year. If you are making decisions regarding assets and liabilities (such as making a large purchase like a house or automobile) you may want to create a statement more often. A

If more background regarding trade‐offs and goals is needed, teach the Setting Financial Goals Lesson Plan 2.1.4.


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financial professional such as a financial advisor, loan officer, or accountant may ask you to create a Statement of Financial Position at some point in your life.

Part 6: Tori Scenario 22. Slide 23: Meet Tori

a. Introduce Tori and explain to participants that they will be asked to create her Statement of Financial Position to help her make a decision regarding whether or not to buy a new car.

b. Provide each participant with Tori’s Statement of Financial Position 2.2.3.A2.

23. Slides 24‐26: About Tori a. Learn more about Tori and have participants record the applicable

information in the “current” column of Tori’s Statement of Financial Position 2.2.3.A2.

b. The information is also included on Tori’s Statement of Financial Position 2.2.3.A2.

24. Slide 27: Tori’s Current Statement of Financial Position a. Have participants complete their Statement of Financial Position. If

desired, have participants compare their statements with a partner or group to find any errors.

b. Show Tori’s Statement of Financial Position on slide 27. Ask participants if their statement was correct. If not, discuss any errors that were made and correct the statement.

25. Slide 28: Tori’s Statement of Financial Position if she purchases a car a. Explain that Tori would like to trade in her car for a new car priced at

$12,000. She would receive $2000 for the trade‐in value of her car. If she purchases the new car she plans to use $1,000 from her emergency savings and apply for a loan for the remaining $9,000. This means she will have to pay that $9,000 back to the loan provider.

b. Ask participants to complete the second “if she purchased a new car” column of the Statement of Financial Position based upon whether she purchased the car today.

c. Discuss how purchasing the car would affect her Statement of Financial Position.

i. The value of her savings account would decrease to $1,000, the value of her automobile would increase to $12,000, and she would add a $9,000 automobile loan.

26. Slide 29: Discussion a. Discuss the questions provided. Possible discussion points include:

i. What is Tori’s current net worth? 1. $4,220

ii. What would her net worth be if she purchased the new car today?

1. $3,220 iii. Based upon Tori’s Statement of Financial Position, would you

recommend that she purchase the new car? Why or why not? 1. Answers will vary but may include: No, I would not

recommend that Tori buy the new car because it will

An answer key for Tori’s Statement of Financial Position 2.2.3.A2 is available in the Statement of Financial Position Answer Key 2.2.3.C1.

The Statement of Financial Position Excel Template 2.2.3.E3 is also available to complete the statement electronically.

Use Tori’s Statement of Financial Position 2.2.3.A2 to facilitate the Tori scenario without the PowerPoint. This may also be completed individually or in small groups.

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decrease her net worth. Her liabilities will increase and she will have to make a monthly payment to pay the automobile loan back. She should also consider that once she is done with her schooling she will have to start paying her student loans back as well. She would be better off continuing to drive her current car since it runs fine. She could use the money saved to pay back her student loans or save more money.

iv. Consider what trade‐offs she will have to make with both options

1. If she doesn’t purchase the new car, her trade‐off will be to own an older car. If she purchases the new car, her trade‐off will be to have lower net worth, more liabilities, and she won’t be as financially secure.

27. Slide 30: Discussion a. How could Tori increase her current net worth?

i. She could save more money or begin to pay off her student loans. She could also invest more into her retirement account.

b. To bring a life cycle focus, discuss how sometimes students investing in their higher education have low or negative net worth, because they are taking out loans to pay for the higher education or aren’t making much money while attending school. These people are willing to make this sacrifice, because by investing in higher education, they are increasing their future earning ability. Sacrifices are made in order to potentially be able to increase their future net worth. This is what Tori is doing. If she doesn’t purchase the new car she will be one step closer to increasing her future net worth.

28. Slide 31: Summary a. Summarize the main points of the lesson.

CONCLUSION OPTIONS There are two conclusion options provided for this lesson. 1. Option 1: Card Sort 2. Option 2: Reinforcement Worksheet

Option 1: Card Sort Approximate time: 10 minutes Materials to prepare: Refer to the Card Sort Active Learning Tool 3.0.9 for materials

o Card Sort Questions for Statement of Financial Position 3.0.9.H1 1. Conduct the Card Sort activity. Refer to the Card Sort Active Learning Tool 3.0.9

for directions and materials. a. Card Sort involves participants collaborating with others to categorize

similar information.

Option 2: Reinforcement Worksheet Approximate time: 30 minutes Materials to prepare: 1 Net Worth Knowledge 2.2.3.A3 per participant



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1. Complete the Net Worth Knowledge 2.2.3.A3 as directed.

ASSESSMENT OPTIONS There are two assessment options provided for this lesson. 1. Option 1: Financial Position Throughout the Life Cycle 2. Option 2: My Statement of Financial Position

Option1: Financial Position Throughout the Life Cycle Approximate time: 30‐60 minutes Materials to prepare: Scenarios (quantity needed depends on facilitation option selected)

o Cody’s Statement of Financial Position 2.2.3.A4 o Chuck and Wendy’s Statement of Financial Position 2.2.3.A5 o Ed and Mary’s Statement of Financial Position 2.2.3.A6.

1 Statement of Financial Position Template per participant o 2 options are available o Statement of Financial Position Template 2.2.3.E2 (complete by hand) o Statement of Financial Position Excel Template 2.2.3.E3 (complete

electronically) 1 Financial Position Throughout the Life Cycle 2.2.3.A7 per participant There are two facilitation options for this assessment. Option 1: Create a Statement of Financial Position for one of the scenarios and

answer discussion questions. Option 2: Complete a Statement of Financial Position in addition to

collaborating with others to analyze all three scenarios and discuss life cycle changes.

Option 1: Create a statement for one scenario 1. Provide each individual or group a scenario and one of the Statement of

Financial Position templates. 2. Allow time for each individual or group to complete the statement for their

scenario and answer the questions. Option 2: Add a life cycle focus 1. Divide the three scenarios (Cody’s Statement of Financial Position 2.2.3.A4,

Chuck and Wendy’s Statement of Financial Position 2.2.3.A5, and Ed and Mary’s Statement of Financial Position 2.2.3.A6) evenly among participants.

2. Allow time for each participant to complete the statement for their scenario and answer the questions.

3. After all statements are complete, provide each participant with a Financial Position Throughout the Life Cycle 2.2.3.A7.

4. Create groups that include at least one person that completed each scenario (each group should have at least one of the three scenarios).

5. Have participants share the information from the scenario they completed with the other members of their group.

6. The group should work together to use the completed Statements of Financial Position for each scenario to complete the Financial Position Throughout the Life Cycle 2.2.3.A7.

Instead, complete option 2 by splitting participants into groups to summarize their information and present to the class. The shared information may be used to complete Financial Position Throughout the Life Cycle 2.2.3.A7.

Have participants underline assets and circle liabilities as they are reading the scenarios.

Have participants create pie charts to visually show the difference between the three scenarios.

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Option 2: My Statement of Financial Position Approximate time: 30 minutes and possible time outside of class to conduct research Materials to prepare: 1 My Statement of Financial Position 2.2.3.A8 per participant Statement of Financial Position Template 2.2.3.E2 or the Statement of Financial

Position Excel Template 2.2.3.E3 to complete electronically 1. Participants complete a Statement of Financial Position for themselves. The My

Statement of Financial Position 2.2.3.A8 includes questions for participants to complete after the statement has been created.

a. Use the Statement of Financial Position Template 2.2.3.E2 to complete by hand or the Statement of Financial Position Excel Template 2.2.3.E3 to complete electronically.

b. It may be beneficial to introduce this assessment the day before completing to allow time outside class to research specific numbers.

Have participants also create a Statement of Financial Position for what they want their life to look like in five or ten years. Have them set goals to reach financial standing outlined in that statement.

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Statement of Financial Position Vocabulary List

TERM DEFINITION

1 Asset Items of monetary value a person or household owns

2 Expense Money spent

3 Income Money received

4 Investment asset Financial assets purchased with the hope that they will generate income and appreciate in value to make it possible to sell at a higher price in the future

5 Liability A debt or obligation owed to others

6 Market value The amount you could realistically sell an asset for today

7 Monetary asset Assets that can be quickly and easily converted into cash

8 Net worth A measure of financial wealth and indicates the monetary value of all possessions that a person or household owns, minus the total amounts owed to others

9 Statement of Financial Position

A financial statement that describes an individual or family’s financial condition on a specified date by showing assets, liabilities, and net worth

10 Tangible asset Personal property that was purchased to create a lifestyle or improve your life

11 Wealth A measurement of how much a person or household owns once all debts have been paid

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Statement of Financial Position Word Grid

Total Points Earned

Name

14 Total Points Possible

Date

Percentage

Class

Directions: 1. Before the lesson:

a. Write a definition in your own words (in the shaded area) for each bolded term. (5 points) 2. After the lesson:

a. Review the definitions and make any edits to ensure the definitions are correct. b. Complete the word grid again by placing a “” in each box that correctly matches a section of the Statement of Financial Position with an

item. (9 points)

Monetary Asset Tangible Asset Investment Asset Liability Net Worth

Definition in your own words

Wealth

Sporting goods

Student loan

Value of checking account

Retirement account

Automobile loan

Electronics

Credit card balance

Value of a savings tool account

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Statement of Financial Position Note Taking Guide Total Points Earned

Name

Total Points Possible

Date

Percentage

Class

Statement of Financial Position for:

Date:

Assets

Monetary assets

Cash on hand

Value of checking account and savings account

Other:

Subtotal of monetary assets $

Tangible Assets

Market value of home

Market value of household furnishings

Market value of automobile

Market value of electronics

Market value of clothing

Other:

Subtotal of tangible assets $

Investment Assets

Value of investments

Other:

Subtotal of investment assets $

Total Assets $

Liabilities

Home mortgage balance

Installment loan balance for automobile

Student loan balance

Credit card balance

Money owed to others

Other:

Total Liabilities $

Net Worth = Total Assets ‐ Total Liabilities $

What is net worth?

What is wealth?

Circle where assets are located on the Statement of

Financial Position. What is an asset?

Place a star next to where monetary assets are

located on the Statement of Financial Position. What

is a monetary asset?

Place a star next to where tangible assets are

located on the Statement of Financial Position.

What is a tangible asset?

Place a star next to where investment assets are

located on the Statement of Financial Position. What

is an investment asset?

What is the Statement of Financial Position?

Circle where liabilities are located on the Statement

of Financial Position. What is a liability?

Circle where net worth is located on the Statement

of Financial Position. How is net worth calculated?

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How often is it recommended to create a Statement of Financial Position?

What are the benefits of writing down a Statement of Financial Position versus only "thinking" about it?

Net Worth

The Statement of Financial Position

What is my financial position

____________?

What is my

_____________ money

management plan?

How have I managed my money in the

__________?

1. __________

____________

How can you increase net worth?

What three money management tools work together to help you manage

your money, and therefore, increase net worth?

Why should you keep your net worth in mind when making financial

decisions?

2. __________

____________

3. __________

____________

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Tori’s Statement of Financial Position Total Points Earned

Name


Date

Percentage

Class

Step One:

Tori is considering purchasing a new pre‐owned car. In order to help make a decision she would like to know her net worth. Use the information provided in the table below to create a Statement of Financial Position for Tori. (10 points for completion)

Tori is 21 years old Completing training to be a radiology technician and has one semester left

Works part‐time to earn $13,000 per year Owes $5,000 in student loans that helped pay for her training

Owns a car that runs fine but would like an upgrade

Used a website to determine the market value of her current car is $3000

Has $1,000 in her checking account Keeps $20 in cash in her wallet at all times

Keeps $2,000 in her savings account for emergencies

Rents a one bedroom apartment and owns $1,000 worth of furniture and other household supplies

Bought a laptop computer when she started school but estimates that it is only worth $200

Loves to shop and estimates that she owns $1,500 worth of clothes and shoes

Invests $20 per month into a retirement account that is currently worth $500

Step Two:

Tori would like to trade in her car for a new pre‐owned car priced at $12,000. She would receive $2,000 trade‐in value on her car making the purchase price of the new car $10,000. She will use $1,000 from her emergency savings and apply for a loan for the remaining $9,000. Create a new Statement of Financial Position for Tori if she were to purchase the new car. (10 points for completion)

Step Three:

Use Tori’s Statements of Financial Position to answer the questions below. 1. What is Tori’s current net worth? (1 point)

2. What would her net worth be if she purchased the new car today? (1 point) 3. Based upon Tori’s Statements of Financial Position, would you recommend that she purchase the new

car? Why or why not? Make sure to consider what trade‐offs she will have to make with both options. (2 points)

4. How could Tori increase her current net worth? (1 point) 5. Tori has chosen to use student loans to help her pay for training to become a radiology technician. This

has lowered her current net worth, but what impact may it have on her future net worth? (1 point)

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Current:

If she purchased a new car:

Statement of Financial Position for: Tori

Date:

Assets

Monetary assets

Cash on hand


Value of savings account

Other:


Tangible Assets






Market value of jewelry

Market value of sporting goods

Other:


Investment Assets


Other:


Total Assets $

Liabilities


Loan balance for automobile


Personal loan balance

Credit card balance


Other:

Total Liabilities $


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Net Worth Knowledge Total Points Earned

Name


Date

Percentage

Class

Directions: Match the word with its definition. (1 point each)

1. ______ Net Worth

2. ______ Liabilities

3. ______ Assets

a. A debt or obligation owed to others

b. Measure of financial wealth

c. Everything a person owns with monetary value

Directions: Help Mindy understand her Statement of Financial Position by answering her questions below.

Make sure to provide an explanation to each answer to help Mindy learn more about the Statement of

Financial Position. (2 points each)

4. Mindy still owes $25,000 on her home loan. However, she called her loan provider and they informed

her that if she were to pay her home loan off today, she would pay $18,500 because she wouldn’t

have to pay interest for the remainder of the loan. What amount should be recorded in the liabilities

section of her Statement of Financial Position?

5. Mindy signed a contract with her Internet provider and will be paying $75 per month for her Internet

service for a minimum of one year. Since she is required to pay this monthly payment for a year,

should Mindy’s monthly Internet service fee be recorded as a liability on her Statement of Financial

Position?

6. Mindy purchased a computer last year for $800. However, after looking through the newspaper

classifieds and an Internet selling site, she sees that similar computers are only selling for $300. What

amount should be recorded in the asset section of her Statement of Financial Position?

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7. Mindy is grateful to have an employer‐sponsored retirement account that is worth $10,000. She

knows this is an asset, but doesn’t know if it should be recorded as a monetary, tangible, or

investment asset. How should she record this asset?

8. After completing her Statement of Financial Position, Mindy finds that she has a net worth of

$40,000. She doesn’t quite understand how she can have a net worth of $40,000 if she earns $50,000

per year at her job. How would you explain net worth vs. income to Mandy?

Directions: Answer the following questions using complete sentences.

9. What is the purpose of a Statement of Financial Position? (1 point)

10. Describe the difference between monetary assets and tangible assets. (2 points)

11. Why is the market value, instead of the purchase value, of assets listed on the Statement of Financial

Position? (2 points)

12. Why is net worth compared to a financial thermometer? (1 point)

13. How can you increase net worth? (1 point)

Page | 19 2.2.3.E2


Statement of Financial Position Template Total Points Earned

Name

Total Points Possible

Date

Percentage

Class

Statement of Financial Position for:

Date:

Assets

Monetary assets

Cash on hand



Other:


Tangible Assets







Market value of sporting goods

Other:


Investment Assets


Other:


Total Assets $

Liabilities


Loan balance for automobile



Credit card balance


Other:

Total Liabilities $


Page | 20 2.2.3.A4


Cody’s Statement of Financial Position Total Points Earned

Name


Date

Percentage

Class

Cody is enrolled in a personal finance class in his second semester of college and one of the assignments is to

create a Statement of Financial Position. Although he feels overwhelmed, he has gathered his financial

information and is ready to complete this task. Use the information below to help Cody create his Statement

of Financial Position for August 1. (10 points for completion)

Cody begins by looking through the stack of bills and statements he has filed. He currently owes $2,600 in

student loans and has a credit card balance of $850 for one card and $1,200 for another. He remembers that

he borrowed $200 from his parents to go to Florida for spring break and he owes $3,200 for his truck, which

is worth $4,500.

Although he doesn't own a home, Cody invested in some furnishings before moving to his own apartment

last semester. He owns a television valued at $250 and an MP3 player which is worth $200. When he started

school, he purchased a laptop, which is now valued at $750. He owns a game system valued at $250 and

although he owns clothing and other items, he realizes the only other item of real value is a watch his

grandfather left him. Last year Cody's mother visited an antique appraiser and learned the watch was worth

$200. His current checking account balance is $560 and $945 is available in his savings account. Cody also has

$3,400 saved in other types of savings tools at a depository institution.

Using the template provided, complete Cody's Statement of Financial Position. When the statement is

complete use it to answer the questions below about Cody's overall "financial temperature."

1. Would you describe Cody's current financial position as good, average, or poor? Provide two specific

examples to support your position. (3 points)

2. What are two specific steps Cody could take to increase his net worth in the next year? (2 points)

Page | 21 2.2.3.A5


Chuck and Wendy’s Statement of Financial Position Total Points Earned

Name


Date

Percentage

Class

Chuck and Wendy have been married for three years and have been saving to purchase a home. Their real

estate agent has encouraged them to take a long look at their finances before beginning the loan approval

process. They want to create a Statement of Financial Position for May 31 to determine steps they can take

to improve their financial well‐being. Use the information below to help Chuck and Wendy complete this

task. (10 points for completion)

As Wendy sorts through their information, she is excited about the $15,000 the couple has managed to

deposit into their savings account. They both knew they wanted to own a home and making it a habit to save

money early in their marriage has helped them almost reach that goal. Other positives include $5,000 in

other savings tools and a balance of $1,340 in a joint checking account. Chuck's employer also matches his

401k retirement contributions which has helped the account reach a value of $12,400. Wendy has begun

saving for retirement as well and has $8,600 in her individual retirement account. They own two vehicles,

one valued at $7,500 and the other at $6,000. Items the couple owns include two computers, worth $600

each, a digital camera valued at $560 and a television worth $300. They also own two jet skis, valued at

$2,200 each, and living room and bedroom furniture that is worth approximately $3,000.

Chuck's paperwork pile isn't as reassuring as the one Wendy has been looking through. According to the

credit card statement, the couple owes $3,500 for their credit card and another $2,000 remains on the loan

they took out to purchase the jet skis. Although one vehicle is paid for, they owe $4,000 for the other, and

another $8,000 combined for their student loans.

Using the template provided, complete Chuck and Wendy’s Statement of Financial Position. When the

statement is complete, analyze the statement to answer the questions below about Chuck and Wendy’s

overall "financial temperature."

1. Would you describe Chuck and Wendy’s current financial position as good, average, or poor? Provide two

specific examples to support your position. (3 points)

2. What are two specific steps Chuck and Wendy could take to increase their net worth in the next year? (2 points)

Page | 22 2.2.3.A6


Ed and Mary’s Statement of Financial Position Total Points Earned

Name


Date

Percentage

Class

As retirement grows near, Ed and Mary are more and more anxious about their financial position. They

worked hard for many years and saved quite a bit of money, but they aren't sure they have planned well

enough to meet their financial needs during retirement. Their financial advisor has encouraged them to take

a serious look at their finances by creating a Statement of Financial Position for October 15. Use the

information below to help Ed and Mary complete this task. (10 points for completion)

As Mary and Ed look through their information, they see both positive and negative factors that contribute to

their financial position. Their home was just appraised at $215,000, on which they owe only $18,000. They

have $37,500 in their savings account. Other positives included their $12,000 in stocks, a balance of $2,250

in a joint checking account and $3,000 in other savings tools. Their individual retirement accounts total

$230,500, and they own fifty acres of land that is valued at $48,000. They also own two vehicles, one valued

at $12,000 and the other at $8,000. Items the couple owns include a computer, worth $500, a television

worth $400, and antiques valued at $7,000. They also own furniture that is worth approximately $12,000.

Mary inherited jewelry that is valued at $3,000, and Ed has a collection of hunting rifles valued at $5,300.

Although it would appear that Ed and Mary are well off financially, there are additional factors to consider

when evaluating their net worth. They took out a home improvement loan a few years back and still owe

$27,500 to pay that in full. The couple has three credit card balances, for a grand total of $14,300. They owe

$4,000 and $8,000 for their vehicles, and another $8,000 for the fifty acres of land.

Using the template provided, complete Ed and Mary’s Statement of Financial Position. When the statement

is complete, analyze the statement to answer the questions below about Ed and Mary’s overall "financial

temperature."

1. Would you describe Ed and Mary’s current financial position as good, average, or poor? Provide two

specific examples to support your position. (3 points)

2. What are two specific steps Ed and Mary could take to increase their net worth in the next year? (2 points)

Page | 23 2.2.3.A7


Financial Position Throughout the Life Cycle Total Points Earned

Name


Date

Percentage

Class

Directions: Use the complete Statement of Financial Position’s for Cody, Chuck and Wendy, and Ed and Mary to answer the questions below.

1. Complete the table below to indicate the total assets, liabilities, and net worth for each person or family. (9 points, ½ point each)

Assets Liabilities Net Worth

Cody

Monetary assets:

Tangible assets:

Investment assets:

Total assets:

Chuck and Wendy

Monetary assets:

Tangible assets:

Investment assets:

Total assets:

Ed and Mary

Monetary assets:

Tangible assets:

Investment assets:

Total assets:

Page | 24 2.2.3.A7


2. What life events are impacting the financial choices each individual/family is making? (3 points) Cody: Chuck and Wendy: Ed and Mary:

3. How do the differences in net worth reflect changes in financial position throughout the life cycle? (1 point)

4. Cody is in college. How do you think his Statement of Financial Position will change after he graduates from college? Identify at least two specific changes. (2 points)

5. Chuck and Wendy are newly married. Do you think Ed and Mary had a similar Statement of Financial Position when they were first married? Why or why not? (2 points)

6. Based on their Statement of Financial Position, would you recommend that Ed and Mary retire next year? If so, explain why. If not, explain what you would recommend they do financially before they retire. (2 points)

7. Why is it ideal for net worth to increase as people get older? (1 point)

Page | 25 2.2.3.A8


My Statement of Financial Position Total Points Earned

Name


Date

Percentage

Class

Step One:

Complete a Statement of Financial Position for yourself using the template provided. (10 points for completion)

Step Two:

After completing your Statement of Financial Position, use the statement to answer the questions below.

1. Is your net worth higher or lower than you expected prior to creating the statement? Explain. (2 points)

2. Do you think your current net worth is similar to others your age? Why or why not? (2 points)

3. How can creating a Statement of Financial Position every year help you make financial decisions? (1 point)

Page | 26 2.2.3.A8


4. What are two things you could do in the next year to increase your net worth? What trade‐offs will be involved with each item? List at least one trade‐off per item. (4 points)

How I will increase my net worth in the next year Trade‐off

1

2

5. What are two things you could do in the next five years to increase your net worth? What trade‐offs will be involved with each item? List at least one trade‐off per item. (4 points)

How I will increase my net worth in the next five years Trade‐off

1

2

2.2.3.F1

© Take Charge Today – August 2013 – Statement of Financial Posi on – Page 1 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Ins tute at The University of Arizona

Statement of Financial Posi on

Advanced Level

Who is wealthier?

Ian Mitchell

Income $30,000 $85,000

Net Worth $50,000 $35,000

Meet Ian and Mitchell. Ian has an income of $30,000 per year and a

net worth of $50,000. Mitchell has an income of $85,000 per year and

a net worth of $35,000.

Who do you think is wealthier, Ian or Mitchell? Why?

Net worth is a measure of financial wealth and indicates the monetary value of

all possessions that a person or household owns, minus the total amounts owed

to others.

Net worth is different than income. Income is money received such as wages earned from working for pay. A person

can have a high income and low net worth and vice versa. If a person spends all money received and does not save

and/or invest any money, they may have low net worth (no ma er

how high their income).

How do you determine your net worth? Net worth is calculated using

the Statement of Financial Posi on. A Statement of Financial Posi on

is a financial statement that describes an individual or family’s financial

condi on on a specified date by showing assets, liabili es and net

worth. A Statement of Financial Posi on is similar to a balance sheet

made for businesses but is designed for individuals, families, and/or

households. In fact, you may be asked to create a Statement of

Financial Posi on at some point in your life by a financial advisor, loan

officer, accountant, etc.

Statement of Financial Posi on

Net Worth Wealth

Assets

Assets are items of monetary value that a person or

household owns. Assets can be divided into three

categories: monetary, tangible and investment. Monetary assets are assets that can be quickly and

easily converted into cash. This includes any cash

you have on hand plus money in checking and

savings accounts.

2.2.3.F1


What assets do you own?

Tangible assets (also known as use or lifestyle assets) are personal property items

such as a home, an automobile, electronics, furniture and any other personal

property used to create a lifestyle or to improve your life.

The value of tangible assets can change over me. For example, over the course of a

year some of your tangible assets will increase in value while others may decrease in

value. The relevant value for the Statement of Financial Posi on is the current

market value of each item listed. The market value is the amount for which you

could realis cally sell the asset today, not what you originally paid for it.

There are resources that can help you determine the market value. Some website

tools es mate the market value of automobiles. For example, Derek purchased a car

two years ago for $12,000. He used a website to determine that the current market

value of his car was $8,500. He should record $8,500 on his Statement of Financial

Posi on. To determine the market value of less expensive assets, such as electronics

or furniture, your research could include websites such as Amazon, eBay and

Craigslist. These websites and others specialize in selling new and used items.

Assets, con nued

Liabili es

A liability is a debt or obliga on owed to others. Examples of liabili es include the

balances on your automobile loan and credit cards, student loan debt and other

amounts you’ve promised to pay back to others.

Liabili es should be recorded in the liabili es sec on of your Statement of Financial

Posi on. When recording the amount for each liability, indicate the amount necessary

to pay off the loan in full today. For example, suppose you have an automobile loan

that has a remaining balance of $5,490. You s ll have 35 months of payments le

before the loan is paid in full. If you were to con nue making your scheduled monthly

payments of $180 including interest owed, you would have paid a total of $6,300 over

that 35 month period. But because a Statement of Financial Posi on is based on a

specific date, you would record what you owe today, which is $5,490, not the total

payments equaling $6,300.

It is important to note that liabili es are not expenses. A liability is a debt. The

payment you make to pay back the debt is an expense. So, for example, your car loan

is a liability and the monthly payment to repay the car loan is an expense.

Do you have any

liabili es?

Investment assets are

financial assets purchased

with the hope that they

will generate income and

appreciate in value to

make it possible to sell at

a higher price in the

future. Investment assets

include re rement

accounts, stocks, bonds,

mutual funds and other

forms of financial

investments.

2.2.3.F1


Net worth is like your personal financial thermometer. It provides you with a number that can

measure your “financial temperature.” What do you want your financial temperature to be? The

amount of desired wealth varies from person to person. For some, desired wealth is defined as

having enough net worth to maintain a comfortable lifestyle during re rement. For others, it is

having enough to feel a sense of sa sfac on with their financial well‐being. Determine what

amount of net worth you desire and then set goals to reach that amount.

Your present self impacts your future self

As you plan for your financial future, determine your net worth by crea ng a Statement of Financial Posi on.

Research shows that individuals have a tendency to believe they owe less than they actually do or own more than

they actually do. To avoid falling into this trap, a wri en Statement of Financial Posi on gives you a tangible

record to refer to and helps you set financial goals. Use any wri en method that works for you (by hand, a

spreadsheet, etc.). To increase your net worth, increase your assets, decrease your liabili es, or work on a

combina on of both.

Annual updates of your Statement of Financial Posi on are a good idea. If you are making major decisions such as

to purchase a house or an automobile, create a statement more o en. This will help you to keep your net worth in

mind when making financial decisions, especially when taking on more liabili es. Before you commit to a loan, ask

yourself whether you could you use money gained from selling off an asset instead of taking out a loan? Could you

decrease the amount of the loan by purchasing a less expensive item? Remember that the choices you make today

will affect your financial future.

In addi on to the Statement of Financial Posi on, there are two other money management tools that help

evaluate your past, present and future financial decisions. They are the Income and Expense Statement and the

Spending Plan. These three money management tools work together to help you objec vely evaluate your

financial situa on and work towards reaching the net worth level you desire.

Net Worth

Crea ng a Statement of Financial Posi on

Once you have determined the value of all your assets and liabili es, subtract the total liabili es from the total

assets to determine your net worth:

Liabili es Net Worth Assets

2.2.3.F1


Statement of Financial Posi on for:

Date:

Assets

Monetary assets

Cash on hand



Other:


Tangible Assets







Market value of spor ng goods

Other:


Investment Assets


Other:


Total Assets $

Liabili es


Installment loan balance for automobile



Credit card balance


Other:

Total Liabili es $

Net Worth = Total Assets ‐ Total Liabili es $

STATEMENT OF FINANCIAL POSITION TEMPLATE

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