Have you ever wanted to find out how financially fit you are? Or are you interested in your financial progress? Then maybe you should start by calculating your net worth. Your net worth statement is like the doctor’s diagnosis. It tells you how good or how messed up your finances are. You could be drowning in debts just as you could be wallowing in cash so much so that you could retire tomorrow but you may never find this out if you don’t calculate your net worth.
Net worth is actually your total assets minus your total liabilities. So then it would be the value of all you own such as houses, jewelry, cars, cash, bonds, shares, retirement accounts, minus your debts such as student loans, credit card debts, mortgages, car loans, other loans and debts.
Calculating your net worth isn’t that difficult. All you need to do is make two lists; on the first write down all you owe such as houses, valuable jewelry, cars, cash etc. On the second list write down all you owe, from credit card debts to loans etc. Then subtract what you owe from what you own.
There are also online net worth calculators which can help you calculate your net worth. The one I found interesting was http://www.calculatorweb.com/calculators/netwcalc.shtml. You can also Google net worth calculators and use the one you are comfortable with.
A positive net worth is when your assets are more than your debts and a negative net worth is when your debts are more than your assets. Everyone should strive to have a positive net worth, working towards increasing assets and decreasing debts.
Calculating your net worth should be done at least once a year. Why, you may ask.
1. Because it tells you what your finances look like at a certain point in time. How financially fit you are.
2. It helps you identify the areas that need improvement such as decreasing your debts.
3. It helps you measure your progress towards your goals. If a goal is to diminish debts, calculating your net worth regularly will show you how you are doing.
Well then, now that you know why your net worth is important, I hope you will take that first step and find out what it is. Best of luck.