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:
Credit card balances
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.