How to Determine Your Net Worth

by Gily Tenorio on February 19, 2012

in Personal Finance

Hi there, this is only a short post. I’ve been busy doing other things on other blogs that I’m building right now. I hope you could continue visiting this blog. Please Like our Facebook page or Subscribe to our blog. You can see the link at the right side bar of this page.

For clearer understanding, I would like to define net worth first because maybe you will think that I’m greedy or lover of money. In this post, if I mentioned the word” net worth”, it is the sum of your assets and liabilities, nothing else. Your net worth is not equal to your self-worth or vice-versa. Your worth as an individual is more than money.

Why do you need to determine your net worth? Is it to boast to other people that you are now rich? One better purpose why you must know your net worth is because it will asses what financial condition you are now in at this moment. After getting your net worth, you will learn whether you are in debt (many liabilities) or your in good condition (zero or few liabilities than assets).

Two Things You Should Know to Get Your Net Worth

In order to determine your (financial) net worth, you should know first and foremost, your assets and liabilities. So what are these things all about? Asset is the sum of all your cash on you savings account, money at hand, investments and cash equivalent of your properties such as houses, lands, cars, appliances, gadgets and passive income sources including businesses you owned.

On the other hand, liabilities are the cash-equivalent of the things you owed to other people, banks or lending companies. Your liabilities include credit card debt, mortgage of your house, college loans, installment payment of your car, and other debts that you owed.

These two things are the components to compute your net worth. It is simple to learn these two stuffs, a simple addition is only needed.

How to Compute Your Net Worth

The best way to determine the wealth of a person is by getting his financial net worth. Actually, it is the measure used by Forbes in ranking the richest persons in the Philippines and in the world.

As what I said earlier, in order to get your net worth, you should know two things: your assets and liabilities. You could list all your assets and liabilities with its corresponding cash equivalent using a spreadsheet in Google Docs.

After completing the list, you just subtract your liabilities from the assets you have. The resulting figure will be your financial net worth. It is simple and easy to calculate since you only use a simple addition and subtraction.

Finally, net worth is far more important than displaying a high status symbol. In my opinion, it is better to have normal stuffs with high net worth than adorning yourself with luxurious items resulting to a low net worth.

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