How and Why To Calculate Your Personal Net Worth

How and Why To Calculate Your Personal Net Worth

( – Checking your net worth regularly is one way to monitor your overall financial health. The calculation goes far beyond the balance in your bank account, incorporating your assets and any debts you owe. Thankfully, the process is simple: capital minus liabilities.

First, write down all your assets, like checking, savings, investment, and retirement accounts, real estate, jewelry, cars, and other investments. Next, figure out their value and add them together. Repeat the process for your liabilities, including student, auto, personal, and mortgage loans, credit cards, and any other debts you carry.

Subtract the liability total from the asset total to determine your net worth. You might want to consider charting the value over time to help you understand when you might be increasing liabilities without necessarily increasing assets proportionally.

Armed with the knowledge, you can take steps to improve your stance through planning. If you want to grow your bottom line, you either have to increase your assets, lower your debts, or both. Once you make adjustments, giving them time to impact you financially, recalculate your net worth and compare. Did your net worth increase or decrease? If you’re happy with your financial direction, keep going on that path. If not, make some additional adjustments and try again.

You might become more aware of your spending, choosier about the assets you accumulate, and encourage yourself to be more strategic with your money if you maintain a growth goal. Having a plan is essential, but calculating and charting your net worth might give you a tool to quantify your accomplishments or setbacks.

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