Posted on: 14 June 2017
One of the best things you can do to measure your financial progress is perform tests to determine if your financial state is improving. While there are numerous ways to do this, one good method is by periodically checking your net worth. Your net worth is a number you can easily calculate, and you can use it as a measurement of your financial growth.
What Is Net worth?
Net worth is an amount that represents how much you are worth. To calculate your net worth, you will need to add up the current value of all your assets and the current value of all your debts. When you add up your assets, make sure you know exactly what they are worth, and include the entire amount even if you owe money on them. Your assets can include your home, land, property, cash, investment accounts, cars, and anything else that is worth a lot of money.
When you calculate your debts, include every debt you have except for normal monthly bills. This means you should include the balance owed on your house and cars, as well as balances owed on credit cards, student loans, and other types of debts. Do not include your utility bills or things like that.
When you have these two amounts, subtract the debts from the assets. This will tell you how much you are worth, or your net worth.
How Often Should You Do This?
Some people like to do this each month on a certain day, while others may only do this quarterly, semi-annually, or annually. You can do this as often as monthly; however, it can be a lot of work to add up all the balances, so you may want to stick with doing it quarterly.
What Can This Help You With?
If you begin calculating your net worth every quarter, you will be able to see if your worth is growing or shrinking. If it is shrinking, you may need to find ways to stop spending money and start saving more. If it is not growing enough, you may also want to look for ways to increase the growth each month.
Calculating your net worth is a great way to measure your growth financially. If you find that you are not experiencing enough increases in your net worth each month, you should talk to a financial planning service for help with your budget and finances.Share