Start Calculating Your Net Worth
We’ve all read headlines about celebrities’ net worth: for example, Taylor Swift is worth $350 million or Kylie Jenner is worth $1 billion. But what does this mean exactly? What is net worth? And how do you calculate or analyze your net worth? In this article, we will be discussing how to start calculating your net worth.
Net worth refers to the total value of all the assets and properties an individual owns. It is an indication of all the wealth that they possess. This is calculated by deducting the value of all of their liabilities (money they owe in house loans, student loans, etc.) from the total value of all the assets and properties that they possess. It is the number that you would have to pay to acquire their wealth.
Now you might be wondering how much your net worth is – while it is definitely nowhere near Taylor Swift or Kylie Jenner, it is important to know your net worth to know your financial position and where you stand from a financial point of view.
So, how do you calculate your net worth?
An individual’s net worth can simply be calculated by subtracting all of their liabilities from all of their assets. For example, first, you must add all of your assets. This includes the liquid cash that you hold plus the balance of your bank account. You must also add the current value of any properties you own, land that you might possess, or business that you operate. It also includes any stocks you have, whether in your portfolio, or a part of your company’s employee stock options. Also, include any vehicles that you own – basically anything that you own that you can sell and realize for money. The sum of this will be the total of your assets. For example, suppose you have properties worth $750,000 plus an annual income of $120,000, plus savings of $130,000, this will put the total of your assets at $100,000.
Calculate your liabilities
This includes all the payment you need to make on money that you owe other people. This may include student loans, home or car loans and it even includes personal loans, that you may have taken from your employer or your relatives or family members. The sum of this will give you the value of all your liabilities. Furthermore, suppose you have taken a loan of about $5,000 from your relative to buy a new scooter or car that you still haven’t paid back. This means your liabilities will be worth $5,000. Remember, to not only include the principal loan amount but also interest to be paid on the loan.
It is a simple and easy step
Now, for calculating your net worth, simply deduct the value of all your assets from all your liabilities – which will give you your net worth. For example, $100,000 minus $5,000 equals $95,000. It is important to calculate your net worth if you’re about to take out a new loan or a mortgage or even if you are going to ask for a pay raise at work. Your net worth will give you information about how much wealth you possess as an individual.
