Identifying your net worth at various instances of your life is a good way to analyse your financial progress over time. Your net worth is the sum total of all the assets you own minus any outstanding liabilities you may have. Put simply, if you were to add up the value of everything you own, and deduct from it the value of any outstanding debts you may have, you will be left with your net worth. In this sense, if your assets exceed your liabilities your net worth is positive, while if your liabilities exceed your assets it will be negative.
You can easily calculate your net worth by following these simple steps,
1.List out all of your assets and estimate their value. Make a sum total of all the values. Among other things, your list of assets will include,
2.List out all your liabilities and add up all their respective values. Some of the common liabilities are,
3.Subtract the total value of the liabilities from the aggregated value of your assets and you will be left with your net worth.
It is important that your remember to be slightly conservative while estimating the value of your assets. If you are unable to find an accurate market price for one or more assets, and overestimate their value, you will be left with an erroneous calculation of your net worth. While this might look good on paper, it does not help you precisely analyse your financial situation over time. Seeking the help of a financial planner or wealth management firm can help you arrive at an accurate estimate of your net worth while reducing several burdens involved in the process.
Some people may have to calculate their tangible net worth instead of a regular net worth calculation. The difference is that tangible net worth subtracts the assets that cannot be directly converted into cash. These include, copyrights, patents, goodwill, trademarks and similar forms of intellectual property. In the event of applying for a loan, calculating tangible net worth becomes important if you own any type of intangible assets. Otherwise, a regular net worth calculation will suffice.
As mentioned earlier, your net worth is a good indicator to use when analysing your financial position over time. In this sense, a yearly calculation of your net worth will give you enough information to help you identify your progress. However, it is also important to calculate and compare your net worth before and after any financial transition. Having both these bits of information will enable you to identify any level of change in your finances. Calculating your net worth at these intervals also helps you record and organise your finances efficiently.
The first time you calculate your net worth will be the hardest. You might find it difficult to accurately identify all your assets and liabilities. But soon, as you learn to record and organise your finances better, the process becomes much simpler. Now, there are also several apps and software that can help you list your assets and liabilities effectively, in order to make your net worth calculation extremely convenient.
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Identifying your net worth at various instances of your life is a good way to analyse your financial progress over time. Your net worth is the sum total of all the assets you own minus any outstanding liabilities you may have. Put simply, if you were to add up the value of everything you own, and deduct from it the value of any outstanding debts you may have, you will be left with your net worth. In this sense, if your assets exceed your liabilities your net worth is positive, while if your liabilities exceed your assets it will be negative.
You can easily calculate your net worth by following these simple steps,
1.List out all of your assets and estimate their value. Make a sum total of all the values. Among other things, your list of assets will include,
2.List out all your liabilities and add up all their respective values. Some of the common liabilities are,
3.Subtract the total value of the liabilities from the aggregated value of your assets and you will be left with your net worth.
It is important that your remember to be slightly conservative while estimating the value of your assets. If you are unable to find an accurate market price for one or more assets, and overestimate their value, you will be left with an erroneous calculation of your net worth. While this might look good on paper, it does not help you precisely analyse your financial situation over time. Seeking the help of a financial planner or wealth management firm can help you arrive at an accurate estimate of your net worth while reducing several burdens involved in the process.
Some people may have to calculate their tangible net worth instead of a regular net worth calculation. The difference is that tangible net worth subtracts the assets that cannot be directly converted into cash. These include, copyrights, patents, goodwill, trademarks and similar forms of intellectual property. In the event of applying for a loan, calculating tangible net worth becomes important if you own any type of intangible assets. Otherwise, a regular net worth calculation will suffice.
As mentioned earlier, your net worth is a good indicator to use when analysing your financial position over time. In this sense, a yearly calculation of your net worth will give you enough information to help you identify your progress. However, it is also important to calculate and compare your net worth before and after any financial transition. Having both these bits of information will enable you to identify any level of change in your finances. Calculating your net worth at these intervals also helps you record and organise your finances efficiently.
The first time you calculate your net worth will be the hardest. You might find it difficult to accurately identify all your assets and liabilities. But soon, as you learn to record and organise your finances better, the process becomes much simpler. Now, there are also several apps and software that can help you list your assets and liabilities effectively, in order to make your net worth calculation extremely convenient.
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