Find out how net worth is calculated, how to calculate your net worth. All about net worth here.
Net worth is an important measurement of one’s finance. There are actually lots of ways of to calculate your net worth, a lot of software and worth calculators. However, to make sure you are doing it correctly you need to have a little understanding of what net worth is and what is even the point of calculating it.
What is Net Worth?
Net worth is basically your financial value. Personal net worth is similar to a company’s net worth. Basically is how much the person/company is worth. Your assets, cash, property, investments, home, debts, student loans, liabilities, etc count towards your net worth.
Net worth can be used to measure someone’s financial performance and decide what financial decisions you should be making in the future. Got a negative result? You should probably focus on reducing your expenses while raising your incomes.
Calculate Net Worth
To determine your networth you just need to take 3 not so complicated steps. Get your piece of paper, pencil, calculator and let’s get started.
Make a list of everything you own and estimate its value
Your assets are everything that you own, that is fully yours. Do you have a savings account? List it. Have you made any investments? Retirement plan? Do you own any stocks? Do you have a pack of cash hidden in the jar under your bed? List, list, and list. There are some things you might not actually have thought about. Does anyone owe you something? Do you expect them to return it to you in the nearest time? Yeah, all of these count towards your assets too.
Once you’ve listed everything that you own (don’t forget anything), calculate the total for all your assets in dollars (or your currency). Save this number for later.
Write down all your debts, listing their volume
Make a list of all your personal loans, debts, student loans, accounts payables, mortgages, credit card loans and so on. Make this list look like a table too and in the second column list all of your debts values. After you are done (make sure you didn’t forget anything, don’t you own your neighbor $5 for babysitting your kid last Friday?), calculate the total of all your debts.
Do the math
The final step would be to subtract your debts from your assets. The best option would get a positive number, meaning you have something to be saved up, however, a negative outcome is also possible.
My net worth is negative. What does it mean?
Probably, receiving the negative net worth wasn’t what you expected, however, it’s completely normal. Sometimes your expenses exceed your income and you just have to go with it. You haven’t yet paid off your student loan debt, or haven’t yet invested enough. Don’t worry, you will get there.
It’s a good idea to regularly check your net worth, maybe even monthly. Thus, you can stay up to date with your finance and monitor any changes. Make sure it’s constantly growing and your expenses for the month are less than your income. Set your financial goals and try to reach them every month!