Being able to identify your net worth is a good starting point to taking control over your finances and measuring your current financial situation.To find out your net worth is pretty simple.
NET WORTH – It is simply your Total Assets minus your Total Liabilities= NET WORTH
Assets - Anything tangible or intangible that can be owned by you
Liabilities - Anything that you are responsible for to pay back. Any thing you owe
Being able to calculate your net worth gives you a clear insight into how much you have accumulated but also how much you owe. In doing this, you will either experience a reality check which can motivator you to do better or highlight and magnify a bad challenging situation.
In all, I encourage you to use this opportunity to improve your situation and invest in moving into a better financial position.
What you need to know about Net Worth
Wealth is not about how much you earn but how much you keep. Someone can earn £100,000 a year and still be broke due to poor money management or just having expenses that exceed their earnings.
So first things first, money is not the issue. How you steward your money in effect is the most important thing here.
Calculating your net worth give you a detailed picture of where you stand at this present moment in your finances. Being able to track your net worth gives you a chance to improve your financial position and measure your progress.
Calculate Your Net Worth
Three simple steps to calculating your net worth.
STEP ONE : CALCULATE YOUR TOTAL ASSETS
Gather and estimate everything you own. If you have a home, find out the current value. If you have a car find out the current value. Find below, a list of things that can fall into your asset category.
- Your Home
- Your Car
- Cash/ Money in your account
- Total Savings
- Any shares or investments
- Current pension Value
- Other properties
- Money owed to you
- Any other assets – this can include anything that holds any value – jewelry, electronics
Add it all up and this will be your TOTAL ASSETS
STEP TWO : CALCULATE TOTAL LIABILITIES
Add up everything you owe.
- Total owed on your mortgage/ rent arrears
- Any car payments
- Student Loan
- Credit cards
- Money owed to friends and family
- Any type of debt connected to your name including your spouses debt.
Add it all up and you will have your Total liabilities
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STEP THREE: THE FINAL CALCULATION
Final step : Total asset minus Total Liabilities. Have a look at the example below