ASSETS – LIABILITIES = NET WORTH
The one true formula that can measure your financial level of success.
The net worth formula is the best way to measure personal wealth and a way to know your true personal worth. Most major financial decisions in our lifetime revolve around personal net worth. Each month you should strive for increasing your net worth as it will help you achieve goals and is a fairly simple thing to keep ongoing track of. I have prepared a spreadsheet that can be used to record it monthly and you can find that here.
Calculating your net worth can also motivate you into becoming a more constant saver… something that most millennials like myself desperately need. It can all be done in three steps!
1.) Calculate Your Assets
Assets include anything that you personally own and can be converted into cash. A condensed list of assets to include (A full list can be seen in the Net Worth Calculation downloadable) cash accounts, savings accounts, IRA’s, 401(k), personal residence’s, automobiles and basically anything and everything inside your living space.
2.) Calculate Liabilities
Liabilities are what you owe. Credit card debt, mortgages, and loans whether on a vehicle or for a college education are the most significant liabilities that Millennials will encounter. After calculating your total liabilities its time to figure out the ending number!
3. Subtract Total Assets From Total Liabilities
Congratulations! You have calculated your net worth and on your way to improving your financial life! By tracking this figure, you can examine if you are accumulating too much debt and help plan for a better financial future. Net worth is often used in acquiring a loan for any Millennials with home-buying on their minds.
S0 grab a beer or a glass of wine and sit down after dinner one night and calculate your net worth. Make it a ritual to calculate it every month and to monitor your progress to growing your net worth. This is your financial health we are talking about here! Feel free to download the Net Worth Spreadsheet here…. Good Luck!