The calculation of your net worth is a relatively easy concept and process if you have relevant information readily accessible. Calculating your net worth will help you in determining whether or not you should make a large purchase. Let’s first discuss what net worth is.
Simply put, your net worth is the sum of all of your current assets less your current liabilities. Many individuals calculate their net worth on a yearly basis so they can see how they (hopefully) improve on a yearly basis.
Now, in order to calculate your net worth, you just need to have some fiscal information concerning the possessions that you own as well as the arrears that you currently owe. Once you have this information ready, you are ready to begin calculating your net worth.
Follow the list below to calculate your net worth.
1. First, you should make a list of your major assets. Your largest assets would include your home, your vehicle(s), whatever you’re investing in, etc. You will want to ensure that your information is accurate. Estimate the current price these assets.
2. Next, you will want to make a list of your liquid assets. Liquid assests would include checking accounts, savings accounts, CD’s, retirement income, and any other type of investment account like Tradeking for example.
3. The next type of asset you should make a list of is personal items such as jewelry, home furnishings, coin collection, etc. Only make a list of things that are worth more than about $500 rather than making a list of every single thing within your home.
4. Take the above assets from all three categories and add them all together. The number that you get is the number that symbolizes your total assets.
5. The next thing you should do is determine your liabilities. As with your assets, make a list of your largest liabilities first such as car loans and mortgage balances.
6. Next, you will make a list of more individual liabilities such as student loans, credit cards, as well as any additional debt that you owe.
7. To achieve the total that ultimately symbolizes your liabilities, add the two categories together.
8. Now, you are ready to deduct the full amount you came up with for you liabilities from the total you came up with for your assets. Once completed, the number that you see is your total net worth.
Now, this is something that you should do each year to see how you are progressing. It is okay if when you did the calculation that it was in the negative or even a small number, this is just a foundation for you. Doing this each year will allow you to see how you are improving or worsening your financial situation.
