A SIMPLIFIED WAY OF CALCULATING YOUR NET WORTH

As we begin the journey towards achieving those new year’s resolutions that we made, I feel its important to know where we stand at the beginning of the journey so as to have a better picture next year, of how far we have come, what we were able to achieve, what we did not and why we did not. Most resolutions and goals that are set have to do with finances, one way or the other. In order to make proper plans and set up ways to achieving this years goals, I feel its prudent to get to know how much you are worth.

 

Most people measure their worth by how much money they bring in as income. So a better salary makes one think they are financially better off. However, this is not the case, there are many people who tend to spend more than they earn, leading to increase in debt, and eventually a reduction of net worth.

 

I intend to make this as simple as possible as most people are not too thrilled about things to do with math. There is a simple formula that any layman can use to know what is his or her net worth.

 

ASSETS – DEBTS = NET WORTH

 

ASSETS: In simple terms, is the money (cash, or cash in the bank) and valubles (such as your car, your house) that belong to you.

 

DEBTS: The monies that you owe others in form of loans, mortgages, etc

 

 

So if for example, you have $500 in your bank, have a car worth $5,000, a house worth $50,000, have a personal loan you owe a friend of $200, you owe the bank $2,000 for the car, and $25,000 for the house, how do you calculate your net worth.

 

STEP ONE: ADD UP ALL YOUR ASSETS

 

==> In this case, it would be $500 (your cash in bank)  +  $5000 (your car) + $50,000 (your house) which comes to a total of $55,500.

 

STEP TWO: ADD UP ALL YOUR DEBTS

 

==> In this case, it would be $200 (personal loan) + $2,000 (the amount you owe on the car loan) + $25,000 (the mortgage loan) and this would come to a total of $27,200

 

STEP THREE: SIMPLE MATH ==> ASSETS – DEBTS

 

Your networth in this case is $55,500 (total assets) minus $27,200 (total debts) which comes to a total of $28,300

 

 

 

Here the $28,300 left is what you are worth.

 

So go ahead, see how much you are worth.