Calculating Your Net Worth

This article explains how to calculate your net worth. Your net worth is determined by subtracting your liabilities from your assets

An important step to measure your financial health is to figure out your net worth. Your net worth gives you a snapshot of where you stand financially. It will give you an exact figure of how much money you have or how much money you owe. Your net worth is the difference between your total assets and total liabilities. Assets are cash and other property with monetary value. Liabilities are the debts that you owe to others. To determine your net worth, you need to first calculate your assets and then your liabilities.

To calculate your assets, you first need to look at your liquid assets. Liquid assets are assets that can be turned into cash, or liquidated immediately. Liquid assets include your checking account balance, your savings and money market account balances, cash value life insurance, and any other asset that has the same value as cash. Pull together all of your financial statements for these types of liquid accounts.

The next type of assets to look at are personal assets and other possessions. These include the current market value of your home, the market value of your automobile or automobiles, your furniture, your stereo, video, or other electronic equipment, jewelry, or any other personal items that have monetary value. Once you have listed all of your personal possession you need to estimate their value and add this up.

The next type of asset to look at are your investment assets. These types of assets are savings certificates or CDs, stocks and bonds, Individual Retirement Accounts (IRAs), Mutual Funds, and any other type of investment you may have. You now need to add up all of your investment assets.

Now you want to total all of your assets. Add together your liquid, personal, and investment assets.

Once you have determined your assets, you need to look at the other side of your financial life. You need to calculate your liabilities. First, look at your current liabilities. Your current liabilities are your credit card debt and any loan balances you may have. Loan balances could include student or automobile loans. Add all of your current debts together.

The next type of liability to look at is your long term liabilities. Long-term liabilities include your mortgage and any other debt that you pay over a long period of time. Add your current liabilities to your long-term liabilities.

You now know what your assets and liabilities are. To finish up the process and determine your net worth, subtract your liabilities from your assets. You now know where you stand financially. How did you do? Did you find out that you're deeply in debt or are you wealthy?

Knowing your net worth can help you achieve your financial goals. It can tell you how much debt you need to pay off or how much money you have to achieve your goals. Determining your net worth is the first step to getting your financial life in order. It's a simple exercise that tells a lot about your financial well-being.

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