dreamstime_s_7685239Whether you are curious about your finances or have a specific reason for calculating your net worth, there are many factors that you will have to take into consideration. Becoming knowledgeable about your net worth will allow you to prepare for events such as retirement or setting up your will. Calculating your personal net worth doesn’t have to be difficult.

To determine your net worth, you will need to make a list of all of your assets. Your biggest assets include any homes or rental property that you may own.  You must include any homes and properties that are under mortgage since they will count toward your equity. Your vehicles will also count as assets and should be listed after your home or land.

Liquid assets are your property that you can easily convert into cash. Liquid assets include cash, checking and savings accounts, retirement account, certificate of deposits CDs, and any other investment account. These assets must be calculated after your equity.

Your personal belongings and antiques should also be included on the list. Typically, the items that carry more than $500 in value should be listed as an asset.

After you calculate your assets, you will need to calculate your liabilities. Liabilities include all of the debts that’s owed. Examples of debts  include credit cards, mortgages, personal loans, and student loans. These liabilities should be deducted from the amount of your total assets. The remaining balance will be your net worth.

If you would like to take charge of your finances you should treat it like a business. One way you can do this is by using a personal balance sheet. It  can be downloaded for free online or you can use Microsoft Excel software.

There are separate columns for the assets, liabilities, and the total is usually calculated at the bottom of the page. You will need to list all of your assets and liabilities in the appropriate columns. Then you will subtract from the assets. This will estimate the total amount of your net worth.

Don’t get discouraged if you find that your  net worth is a negative number. As years go by, you will see that negative number become positive once you pay off all of your liabilities. If you don’t see any improvement  after comparing it for several years, you may need to speak to a financial planner and determine the best method to increase your bottom line.

Keep in mind that overinflating your assets will look good on paper, but it will not give an accurate amount of your finances.

Calculating your net worth should be done on a regular basis, at least once a year. It is important to do your calculations for several reasons, which mainly is preparing for retirement. If you are not seeing any changes in your bottom line over the course of a few years, take a look at the bigger picture and search for a way to eliminate debts.

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