Quantifying your net worth is the best way to know where you stand financially. It’s also a useful tool in monitoring your year-to-year financial progress. While it involves numbers, the calculation is really easy. It will just take 10-20 minutes of your time, and all you need Tim Ferris Net worth is your financial statement, a list of your assets and the debts you have to pay off, some scratch papers and a calculator.
Your net worth is basically the amount that represents the value of all your assets minus your liabilities. The bigger the amount is, the better is your financial standing. This will help you take immediate measures, so you can save yourself from financial disaster. This simple calculation will also help you make informed decisions in the future, especially when it comes to your long-term goals.
Here are the ways:
1. List down your assets.
Start by tallying the worth of your biggest assets, such as your home, vehicles, and other real estate properties. Be realistic in assessing your assets; use estimates of present dollar value. Next, list down the value of your cash, bank and mutual fund accounts, and retirement savings, if you have any. You should also factor your valuable personal items like jewelries, musical instruments, or antique collectibles. Include all personal belongings that are worth $500 or more. Get the grand total of all the figures you’ve listed; the sum represents your total assets.
2. Tally all of your liabilities.
Everything that you owe, whether short-term or long-term liabilities should be listed down. Begin with your major outstanding liabilities, such as mortgage balances and car loans. Next, factor in your personal loans such as your credit cards, cash loans, and any other debt you may owe. Sum up all of your liabilities.
3. Subtract your total liabilities from your total assets.
The difference you’ll get when you subtract your liabilities from your assets will be your net worth. Don’t get too disappointed if you come up with a negative amount. Instead, use your findings to make the necessary adjustments in your finances and spending habit until you achieve a positive or a higher net worth. No matter how big or small your net worth is, just keep your list because that’s something you can compare against in the future.
4. Track your progress.
Keep tabs of your financial health by doing this process once or twice a year and comparing your present numbers with your previous net worth. That way, you can see if you are making any progress or if your assets are increasing and your liabilities are decreasing.
Just a tip: be realistic with your estimates, especially when it comes to the value of your home and vehicle. Inflating the value of your assets won’t do you any good; it will just give an inaccurate calculation of your net worth.