How to Calculate Your Net Worth

What's your net worth?

It's fairly easy to find out the net worth of some of the world's wealthiest celebrities (whether that information is accurate is another matter altogether), but how much do you know about your own net worth? And why would you even need to know that?

Calculating Your Net Worth

The actual calculation behind your net worth is pretty simple. The hard part is tracking down all the numbers that go into the equation.

Basically, your net worth is all of your assets minus all of your liabilities. It's the combined value of all your stuff with all the money you owe others subtracted out.

And yes, it can be a negative number (which isn't the worth thing in the world, and not necessarily a reason to panic).

What Are Your Assets?

If it's worth money, it's an asset. If it will be worth money someday, it's an asset. Some common example:

Cash - physical currency, digital currency, checking accounts, savings accounts, certificates of deposits, etc.
Investments - retirement funds, stocks, pensions, bonds, mutual funds, etc.
Property - land, houses, cars, boats, etc.
Valuables - jewelry, collectibles, art, furniture, etc.

If you can spend it, cash it out, or sell it today (or tomorrow), it's an asset.

What Are Your Liabilities?

Your liabilities are essentially what you owe to others. Examples include:

Creditor debt
Mortgage debt
Student loan debt
Taxes owed
Business debt (if you own your own business)
Outstanding bills

Ideally, your assets should outweigh your liabilities, but that may not always be the case. If you owe a lot in student debts, for example, you may have more liabilities than assets, but that should shift with time.

When Do You Need To Know Your Net Worth?

On a day-to-day basis, your net worth probably doesn't mean all too much. As long as you can cover your expenses and sock away a little for savings, you're probably doing okay.

Over time, however, net worth can be a useful barometer of your financial progress. While we don't all strive to be rich (nor should we), you do ultimately want the needle pointing up. If your liabilities outweigh your assets and that trend is steadily pointing down instead of up, you may need help figuring out how to adjust your strategy.

Similarly, if you want to grow your assets, but find that things aren't your net worth isn't growing year over year, you may need to rethink how you spend your money.

Comments

The Best Way To Budget? Try Pen And Paper -- How Bullet Journaling Can Fix Your Spending

Bullet journaling is a new and trendy way to track your spending. Using pen and paper can make you more active in your budgeting and can be fun too. Here's how to start keeping a bullet journal. You can hear it in the swell of retro-inspired music. You can see it in the resurgence of vinyl records and vintage cameras. You can feel the hum of simple circuitry in the air. Analog is back. Analog products fill a very real, very legitimate desire to untether from the digital world we've been enslaved by. In a society where the speed of information is ramping up at an exponential rate, the world of analog is a reminder to slow down and connect to your surroundings. The analog approach can be implemented in a variety of ways -- even budgeting. The bullet journal community has embraces this pen and paper approach to money-management, developing simple and time-saving methods to track and organize your finances offline. What is bullet journal budgeting? The goal of bulle...

How to Recognize the Signs of a Gambling Problem

Whether it's buying a weekly lottery ticket or taking an annual trip to Vegas to blow off some steam, gambling is a fun and harmless diversion for many people. For others it can become a problem that creates a variety of issues, including extreme financial hardship and deep debt. Let's take a look at some of the tell-tale signs of a gambling problem. When Gambling Goes Beyond Entertainment Win or lose, gambling should be nothing more than a fun activity. When it stops being fun and becomes something that dominates your thoughts or conversations, that's a sign it's becoming a problem. Gambling with Money Meant for Other Things It's one thing to have a few dollars set aside every week for lottery ticket or putting a line item in your entertainment budget for a trip to the casino every few months. It's something else entirely if you're gambling with money intended for other things like rent, food, and paying bills. Gambling with money originally planned to c...

How to Avoid Debt Consolidation Scams

If you're in significant debt, the prospect of becoming rent-free can be alluring. So alluring, in fact, that you might find yourself caught in any number of scams along the way. One common way to pay off debt is through consolidation. This involves combining all your debt and taking out a loan that goes toward paying it off each month. Debt Consolidation can help simplify and streamline the debt payoff process, and it might even save you a little bit of money, too. Still, the debt consolidation industry is rife with scams. Companies might say they offer debt consolidation when, in reality, they're for-profit debt settlement companies looking to take advantage of people. Warning signs of a debt consolidation scam When you're searching for a way to consolidate and pay off your debt, you might come across companies online that promote debt consolidation. But some of these companies aren't offering to help you with debt consolidation. Instead, they're d...

Greatvest Tools

Search This Blog