In order to get on the path of the financial success you absolutely need to know your net worth. Simple calculation may help give you a clearer picture of your financial well-being so you can make more informed decisions about your future.
One of the easiest ways to evaluate your finances is to create an Excel Spreadsheet where you can input all the data and it is usually makes it very easy to calculate numbers. Obviously, if you are not the biggest fan of technology you can definitely use blank peace of paper.Below are the three steps, which you need to do in order to calculate your net worth:
1. Evaluate your assets. Think about all the assets that you own and write them down. Start with your house- if own it, continue with a savings, checking or any other accounts that you have. Also include any retirement, company stock accounts or anything else that you can think of that you own.
2. Evaluate your debts. Make a list of everything that you owe to anyone else including all the credit card debt, college loans, car loans and so on. In my opinion you should not include mortgage on this list though because it a secured loan, which means if you don’t pay it your house will be taken away but you won’t lose any of your savings or retirement money from it. But definitely, don’t forget to account for any debt that you own to your parents, siblings, or friends because this is an important part of your financial picture as well.
3. Subtract your debts from your assets. This is the most important step because it will give you the total value of your net worth. The reason why this step is so important because without knowing where exactly you are starting it is impossible to improve your current financial situation. And this step will help you not only see the good side, which is your assets but also incorporate the other side which is your debt into your financial portfolio.
So now that you know what exactly to do construct your own net worth portfolio in order to find out where you stand financially and how to get where you want to be. Reviewing your net worth statements over time can give you encouragement when you are heading in the right direction (i.e. reducing debt while increasing assets) and provide a wake-up call if you are not on track.