Your net worth could be an effective indicator of your financial condition. It could measure your annual progress financially. In general, the net worth is the overall sum of all your current assets or properties minus the sum of all your liabilities. This way, you could instantly and clearly see if your assets are still bigger compared to your liabilities, which is the ideal scenario.
Calculate your net worth to determine your current personal financial performance. Do not worry if you think you would obtain a negative figure. Instead, be positive about it and set effective goals to emerge out from the situation. It would surely be helpful and more advantageous if you knew your present financial condition. Furthermore, computing net worth is not as difficult as you think it is.
Net Worth Calculations
To calculate your net worth, you have to allocate some time and an ample amount of effort. That is because you should obtain necessary and relevant information pertinent to the computation. When you have gathered all important data about your assets and liabilities, you may spend just a few moments and use a piece of paper or calculator. You may also opt to do the task of using the computing program on your computer (probably MS Excel).
List all your current and outstanding assets. You may start listing down your largest or most expensive properties. Put the less valuable ones at the end of the list. Do not forget to include your checking and savings accounts balances, possible bonds or stocks, or even retirement savings. Use accurate and timely estimates for your physical assets like your car and home.
Add all of your listed assets. The sum would be your total assets. Set the figure aside for a while.
Make a list of every outstanding debt you may have. These would be classified as your liabilities. Unlike assets, which could be considered your possessions, liabilities are loans, debts, or other payables you have incurred. Do not forget to include your personal loans (short term loans or long term loans), home loans, car loans, student loans, credit card balances and all other payables.
Take the sum of all the liabilities listed. The figure would be your total liabilities.
After obtaining the two sets of numbers (sums), deduct your total liabilities from your total assets. The difference logically is your net worth.
The difference could be a positive or a negative number. You are in good financial position if the value is positive. However, if it is negative, consider it a challenge. It means you have not earned sufficient income to counter or repay all your payables. Do not worry because it is just normal for all of us to experience having a negative net worth even once in our lives.
Young earners are more likely to incur negative net worth. It should not be seen as a detriment. Instead, a negative net worth should be a challenge that would prompt anyone to better. Net worth could be increased through various strategies. You could make your debts smaller by repaying those or you could make your total assets bigger.