How to calculate your net worth
If you fail to plan then you are planning to fail. Hence, planning becomes indispensable for your success and financial freedom. If you want to achieve your financial goals in time, it is imperative to have a robust financial plan. A proper plan holds people accountable, which can improve your financial wellness. Moreover, having a plan can give your life a structure and meaning that will go a long way in leading a better life.
Among the various steps that you are required to follow for proper financial planning, an important one is to know your net worth. Knowing your net worth helps you in determining where you stand to get to where you want to go. Your net worth is a measure of your financial health and your potential ability to meet your long-term goals.
Net Worth
Your net worth, in the very basic sense, means the surplus of your total financial asset over your financial liability, which means it is everything that is left after you subtract all your financial liabilities from your aggregate financial assets.
The net worth is the best thermometer to check your financial health. This simple financial parameter assists you in determining whether your finances are on track. Some of your smart acts, such as paying off high-interest rates and saving for retirement, can help you to boost your net worth. Similarly, several moves, such as going on a shopping spree and ballooning credit card spending, can get your net worth on life support.
Calculation:
Financial Assets: Everything That You Own
Savings and investment Balance: Includes your balance in bank savings accounts
Investments: Include all the investments made in a mutual fund, direct equity, fixed deposits, non-residential real estate, and retirement accounts, such as PF, PPF, and NPS.
Financial Liabilities: Everything That You Owe
Mortgage: Includes the outstanding home loan balance
Personal Loan
Credit card outstanding balance
Car Loan: loan taken to purchase your car
Any other outstanding liabilities
Your Net Worth = Total Assets (less) Total Liabilities