FinanceFriday – How to Calculate Your Net Worth

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You have probably heard people talk about the net worth of the wealthy men and women across the world. But have you ever tried to calculate yours? Your net worth is very important, especially when it comes to calculating your economic and financial status from time to time. Simply put, it is calculated as your assets minus your liabilities. That is, what you own minus your debts. Your assets could be your investments, cash, cars or whatever you own. Your liabilities could be what you owe on those assets like student loan, car loan, rent payment and so on. Calculating your net worth helps you significantly determine your financial progress. There are 3 significant steps in calculating your net worth.

1.       Calculate your assets
To properly calculate your net worth, you need to first calculate your assets. List out all your largest assets like your house, car, estate, lands and so on. The list should contain their current monetary values. Gather your bank statements and add to the list your current bank account balance, savings and other investments earnings.Add your expensive personal items such as jewelries, gadgets, laptops, phones, television and other expensive items that you have. Add only the personal items that have relevant value. Finally, add it all up to get your total assets. Try not to overestimate the value of your assets be very conservative because the value diminishes easily.

  1. Calculate Your Liabilities
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Calculating your liabilities is pretty much the same thing. List out the major debts you need to pay such as bank loans, rent payment, personal loans, student loans, auto loans, home loans, and so on. Then list all your personal liabilities like credit card debts and any other debt you owe from anywhere. Add it all up; the number you get is your total liabilities.

  1. Calculate Your Net Worth

After calculating your assets and liabilities, it becomes very easy to calculate your net worth. Simply subtract your total liabilities from your total assets and your net worth would be the residual value. In some cases, your net worth may result to a negative figure; but that only means you need to work harder on your financial health. Try saving more, avoid unnecessary debts and cut down on your daily expenses.

Your net worth helps you have something to compare against in future. Try to calculate your net worth annually and compare it with the previous years. This would help you determine if you are making progress and meeting your desired goal or otherwise.

Edited by Lawretta Egba

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