Knowing your net worth is very important for making big financial decisions that are in your best interest. It’s also important to know if you want to truly understand the state of your current financial health and come up with the right solutions that will help you improve it.
So, what is your net worth? And what does it mean exactly? Your net worth is how much money you are technically worth when looking at all the money you have, the assets you own, and the debts you’ve incurred, and it’s kind of like a financial report card or a snapshot of your current financial situation.
How to Calculate your Net Worth
Calculating your net worth is actually pretty simple and shouldn’t take you too long to figure out, especially is you just need an estimated net worth.
The first thing you need to do is make a list of all your assets. Your assets are literally everything you own. This includes the money in your bank accounts and the worth of the house you live in. These plus retirement accounts, the cash in your wallet, savings and investment accounts along with higher value material possessions like your car or expensive artwork, fur coats, or high-end furniture. Add all of these up to get a total value for your assets.
Next, you will need to make a list of your liabilities which admittedly isn’t as fun to think about as your assets. Add up all your debts like your mortgage, car loans, personal loans, title loans, credit card debt, student loans, and any other type of debt you might have. This number will be the total value of your liabilities.
The final step is easy enough with a calculator: simply subtract your liabilities from your assets and, simple as that, that number is your net worth!
Easy Ways to Track your Net Worth
Now tracking your net worth is a different story, not because it requires a different calculation, but because doing that calculation every single month is time consuming and unappealing. Luckily, there are a few ways you can track your net worth more easily without so many calculations.
- Personal Capital
Personal Capital is a website that equips you with some great tools to watch your money and what makes it even better is that it is completely free. You’d be able to access all your debts and assets in one single place you don’t have to add them up every time.
2. Mint from Intuit
Another great online management tool you can use is Mint. Mint is from Intuit and features both a website and an app for both iOS and Android users. Mint will keep close track of all your bank accounts, investment accounts, along with all your credit cards and student loans. Plus, you can use it to create your own budget and categorize your spending so you can slowly increase your net worth over time. Mint is also conveniently free
In order to improve your financial situation, you need to know where you currently stand and the best way of doing that is through knowing your net worth!