Net worth. It’s a concept that we often hear about when we read about a celebrity’s net worth. But you don’t need to be rich to have a net worth. Every individual has a net worth and you can calculate yours too!
Why do I need to know my net worth?
Think of your net worth as a report to keep track of your finances. It is nothing but your financial standing in terms of your assets and liabilities. Your net worth can help you keep a check on your financial situation, year after year. This can help you actively work on and improve your standard of living and be financially secure.
Instead of diving deep into the budgets and expenses, the net worth helps you ascertain your overall financial health. A positive net worth indicates that your financial standing is good and a negative net worth shows you that your liabilities are more than your assets.
How to calculate your net worth
The easiest way to calculate a net worth is to gather all your financial information. Segregate it into two sections – assets and liabilities. The information you need to gather includes:
All your tangible, intangible and liquid assets like car, property, fixed deposits, savings etc. If you are a business owner, then calculate the worth of your business and its market value. Include all your assets and estimate a value. Then list out valuable items like gold coins, jewellery, etc and sum up the values. The total figure you arrive on is the value of your assets.
Your liabilities include any loans, mortgages, insurance plans, etc. Bring out all statements and bills to find out the outstanding amounts of each and then sum it up. The total figure you arrive on is the value of your liabilities.
Once you have all your information in place then just follow the formula below:
Net Worth = Assets- Liabilities
It’s essential to have a healthy net worth for a financially secure and happy life. An ideal net worth would be different for everyone as each one’s financial goal is different and can’t be compared. Therefore, you can use your net worth to figure out where you are in life, where you want to be, and how you will get there. It’s an easy process and one that will help you plan your future finances better.