Your net worth is calculated by subtracting your entire outstanding obligations from your total financial and non-financial assets (mortgage, car loan, personal loan, home loan, business loan, credit card debt, etc.)
To put it another way, it’s the amount of money you’d have in cash if you sold all of your assets and paid off all of your obligations.
An individual’s net worth is a measure of his or her financial situation. Even while there is no one-size-fits-all net worth number to aim for, knowing how to calculate your net worth will help you keep track of your financial development year after year.
It’s not difficult to calculate your net worth; all you have to do is compile all of your assets and liabilities data. Create a safe folder where you may save all of your assets and liabilities data, which you should update at a minimum once per year.
Asset Calculation
Asset Calculation – This may be your home, vehicle, or any other significant investment. If you own a business, you may also want to provide the market worth of your company.
The next step is to get your most recent statements for your liquid assets. Savings accounts, cash, fixed deposits, and other assets are examples of these assets.
Make a list of everything you own that could be valuable. Jewelry, watches, musical instruments, collections, antiques, heirlooms, and other items fall into this category.
Liabilities Calculation
Calculate your largest obligations first, just like you did with your assets. Begin by estimating your obligations, which include your mortgage, vehicle loan, personal loan, and any other significant debt you may have incurred.
Any lingering credit card balances, leftover school loans, or any other debt that has to be paid off are examples of this.
Make the calculations
To calculate your net worth, just subtract the entire number of obligations from the total number of assets. Don’t be dismayed if the number isn’t too high; even if it’s negative, you shouldn’t be concerned—especially if you’re just beginning out in your job.
Calculate your net worth by updating your assets and obligations in your folder at least once a year (ideally on the same day). You can correctly assess your financial growth by comparing this net worth to the net worth from the prior year.
Some topics to think about
When assessing your net worth, estimate the value of your assets as conservatively as feasible. Keep your liquid funds in high-yield accounts if you have any. It would assist you in increasing your riches more quickly.
If you have several outstanding debts, try to pay them off as soon as feasible. To speed up the process of paying off your obligations, try refinancing or combining loans at a reduced interest rate.
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