How To Calculate Your Personal Net worth
A person’s net worth is used to determine their wealth. You have probably read in magazines and websites that a person’s net value had increased or about the net worth of the world’s most prosperous and wondered what your net worth is. We have put together some tips to help you calculate your net worth.
What does Net Worth Mean?
When calculating one’s net worth, the difference between their assets and liabilities is what you need to focus on. After paying all your debts, your net worth is how much money you have leftover. Here is the formula you’ll need to use to calculate this metric: Net Worth = Assets - Liabilities
Steps in Calculating Your Net Worth
Calculating net worth is relatively simple, but gathering all the information you need may take some time. Your current balances on all your loans, credit cards, and mortgages are vital information. It may also be necessary for you to research the cash value of each of your assets. However, once you have that, the process generally goes thus:
- Make a list of all your assets (cash and cash equivalents). Examples include balances of checking and savings accounts and accounts for retirement.
- Identify the cash value of each item: You should not necessarily be concerned with the price you originally paid; instead, try to view it as the price you might expect someone to pay today.
- The total value of your assets is the sum of these values.
- Identify your liabilities (money owed), such as credit lines, mortgages and debt from credit cards.
- Your total liabilities should be the sum of all your debts.
- Determine your net worth by subtracting the liabilities from the assets.