How Much Are You Worth?
While you work or while you spend another hundred grand on those new diamond earrings you saw in Tiffany’s on your way home, have you ever wondered how much you’re worth? I mean how much you’re worth in financial aspect. To be able to plan your future and to know when it’s the right time to save up or splurge, you need to know your next worth. That way, everything you do is calculated and you make the right decisions at the right time. You don’t want to purchase a new car when unbeknownst to you, you’re already drowning in debt. So just how does one calculate his net worth?
First step is to get a pen and paper, you’re going to make a list.
1. List all your assets. Assets are what you have or what’s currently with you. Before anything else, calculate your cash — cash on hand as well as money in the bank, foreign currencies, etcetera. After listing your cash assets, list your investments such as insurances, plans, stock market bonds, mutual funds and the like. Add the amount of your cash assets and investments together. Now list all your fixed assets (house, car, real estate, jewelries, etcetera). Add everything up to find out your total assets.
2. After listing your assets, here comes the hard part — remembering your liabilities. List ALL your liabilities. By ALL, I mean everything from short to long-term liabilities. Short-term liabilities are your every day expenditures including utility bills and household budget. Long-term liabilities are loans and anything similar in nature.
After listing both assets and liabilities, subtract your liabilities from your assets and you should come up with your net worth.
Net worth = Assets - Liabilities
Basic accountancy — I learned that when I was 16, I hope you did too. Having a positive number means you’re being tame and you’re still financially free. Having a negative number means you have to forego buying those new earrings as of now. Know when’s the right time to save up, computer your worth.
Filed under: personal finance
