Oftentimes, we think about how we are doing financially by what we are earning, but that is not the whole picture. We also need to look at what we are spending.
It’s important to look at how much money we can leverage if we need it.
Networth allows you to look at how you are doing financially.
- Some people do this once a year or even quarterly.
- Hopefully, this number goes up over time.
How to calculate your net worth.
- Look at all of the assets.
- Assets are all the money you can get your hands on if you need to. This includes checking, savings, stocks, bonds, mutual bonds, etc.
- These are called liquid funds. Meaning if you wanted to use that money, you could do so reasonably easily. There are no laws to take this money out when you want. Sometimes there will be penalties for some types of accounts.
- Funds that are NOT liquid are retirement-type accounts. There are steep penalties for taking some of this money early.
- Property. The value of the property if you were to sell it now.
- Cars, motorcycles, boats, or RVs. The value of these items if you were to sell them now.
- Jewelry or collections. Need to find experts to determine the value.
- Total the dollar amount of all your assets.
- Look at all of the liabilities.
- Credit card debts.
- Other loans, like personal loans, and student loans.
- Real estate – the amount you still owe on your mortgage.
- Autos – the amount you still owe on your autos.
- Any monies owed.
- Total the dollar amount of all your liabilities.
- Take the total amount of your assets and subtract your liabilities.
- The final number is your net worth.
These amounts will change if you purchase new homes or cars, or take on more debt, like for tuition or other loans.
This number tells you where you stand financially and helps assess where changes may need to be made.
