How To Calculate Your Net Worth And Its Importance
Net worth is a measure of wealth. To calculate your net worth, you need to know that it is the value of all assets minus the total of all liabilities. It’s the difference between what you own & what you owe.
Why should I know my net worth?
- Knowing your how to calculate your net worth helps in achieving your financial goals.
- Net worth is a financial report that helps you evaluate your financial health.
- It helps you identify arras where you spend too much money.
- Knowing your net worth prevent debt from accumulating unnecessarily.
- It helps you determine if you’re making progress in achieving financial independence
- Your net worth is who you’re, you don’t know who you’re financially until you know your net worth
- Knowing how to calculate your net worth helps you spend wisely.
How do I calculate my net worth?
To calculate your networth,
- Create a list of everything you own of value (stocks, property, land, fixed deposits, cash, gold, investment account). Add up the value of all your assets
- Create a list of your liabilities, everything you owe ( loan (car loan, personal loan etc), mortgage, your general debts)
- Subtract the Value of your total of your total liabilities from the value of your total assets to figure out your networth.
You have a negative net worth, if you have a negative answer & a positive net worth, if you have a positive answer.
A positive net worth means you’ve built some wealth, while a negative net worth means you’re in debt for more than you own and have to keep working to climb out of the hole..
If your net worth is declining, this could be a red flag that you need to stop taking on debt and start investing in assets that will improve your situation..
Calculate your net worth today.
Do the math today, get an idea of where you stand financially, and keep track of how your assets and liabilities change over time. When you do, you’ll hopefully see your net worth keep rising.