March 1, 2021
Usually when we think of net worth we imagine all the holdings of a wealthy tycoon who owns several multi-million dollar businesses.
Net worth is just a balance sheet of a person’s assets and liabilities, not unlike the balance sheets used in business. You also have a net worth, and it’s important to know what it is.
Calculating your net worth is simple. First, you’ll want to tally up all your assets. These would include:
- Personal property and cars
- Real estate equity
- Vested retirement plans
- Cash or savings
- Any amounts owed to you
- Cash value of life insurance policies
Next, you’ll calculate your liabilities (what you owe someone else). These would include:
- Mortgage balance
- Credit card balances
- Unpaid obligations
Your total liabilities subtracted from your total assets equals your net worth.
The number could be positive, or it could be negative. Students, for example, often have a negative net worth because they may have student loans but haven’t had a chance to build any personal assets.
It’s important to realize that net worth isn’t always equal to liquid assets. Your net worth includes non-liquid assets, like the equity in your home.
Measuring your net worth regularly can be a strong motivation when saving for the future—it can mark progress toward a well-reasoned financial goal.
When you’re ready to put together a personalized strategy based on your net worth and (more importantly) your future goals, reach out! We can use your current net worth as a starting point, while keeping focused on the real target: your long-term financial picture.