Whether you are curious or have a specific reason for calculating your own personal net worth, there are many factors that you have to take into consideration. Knowing your personal net worth can help you plan for events such as retirement or setting up your will. Calculating your personal net worth is not difficult.
To calculate your personal net worth, you will need to list all of your assets. Your biggest assets will be any homes or property that you may own. Include any homes or properties that are currently under mortgage because they will count toward your equity. Vehicles count as assets as well, and should be listed after your home or land.
Liquid assets are assets that are easily converted into cash. Liquid assets include cash, bank accounts, retirement accounts and any other investment account such as a certificate of deposit. These assets should be calculated after your equity assets. Personal belongings and antiques should be included as well. Typically, items that carry more than a $500 value should be listed as an asset.
After calculating your assets, it is necessary to calculate your liabilities. Liabilities include all debts owed. Examples of debts include mortgages, student loans, personal loans and credit cards. These liabilities should be deducted from the sum of your total assets. The remaining balance will be your personal net worth.
Do not despair if your personal net worth is a negative number. As the years pass, you will see that negative number become positive as you pay off your liabilities. If you do not see any improvement in your personal net worth after comparing it over several years, you may wish to speak to a financial planner and determine the best course to increase your net worth. Keep in mind that overinflating assets will look good on paper, but it will not give an accurate picture of your finances.
Calculating your personal net worth should be done on a consistent basis, usually once a year. It is important to calculate your personal net worth for several reasons, mainly preparing for retirement. If you are not seeing a change in your personal net worth over the course of a few years, take a look at the bigger picture and figure out where to eliminate debts.
Thanks for the reminder. I just did the calculation and I am doing okay. 🙂