What is you net worth?
It’s relatively simple to determine what the worth is of the globe’s most wealthy famous people (whether the information is true is a different matter) But how much do you really know about your own wealth? Why would you have to know?
Calculating Net Worth
Net worth can be determined by subtracting all obligations and debts of their assets. It’s the sum of your belongings with all the debts you owe others, and then subtracted from.
- Total Assets + net worth = Total liabilities
It’s true that it could be negative (which isn’t necessarily the most threatening thing that could happen, and isn’t necessarily a cause to be worried).
Which assets do you have?
If it’s worth something that’s an asset. When the item willbe eventually worth something is an asset. Some common examples:
- Cashphysical currency, digital currency savings accounts, checking accounts and certificates of deposit etc.
- Investments – retirement funds, stocks, pensions, bonds, mutual funds, etc.
- Property– houses, land automobiles boats, and so on.
- Valuables – jewelry, collectibles, art, furniture, etc.
If you’re able to use it or cash it out, or even sell it tomorrow (or later) It’s considered to be an asset.
What are your obligations?
Your obligations are basically the amount you owe others. Examples include:
- Creditor debt
- Mortgage debt
- Student loan debt
- Taxes due
- Corporate debt (if you have your own company)
- Outstanding bills
In the ideal scenario, your assets will be greater than your liabilities, but it isn’t always the scenario. If you are obligated to pay a significant amount in student debts, as an instance, you could have more debt than assets, however that will change as time passes.
What is the best time to be aware of the value of your assets?
On a daily basis your net worth might not really mean anything. If you’re able to manage your expenses and stash aside a bit of money, it’s likely that you’re good.
As time passes net worth can become an important indicator of your financial performance. While we’re not all trying to become rich (nor do we need to) however, you will eventually need to see the needle moving upwards. If your obligations are higher than your assets, and the trend is pointing downwards instead of upwards You may need assistance in determining how to change your approach.
Similar to that, if you’re looking to increase your wealth, but you realize that the way you want them to be each year, it’s time to reconsider how you use your money.
