Wednesday, March 26, 2014

Your Net Worth

Your net worth is your total assets minus your total liabilities. In other words, your net worth is everything you own minus your everything you owe.

Why should every goddess know her net worth?  Because it gives you a simple picture of your financial health. It lets you make informed decisions about where you stand financially. It helps you plan for your financial future by showing you what you need to work on and what you have with which to work. It can be easy to lose track of how much you owe or how much you have. This gives you a simple number to sum it up.
I compute our net worth about once a year around this time so I can see how we are doing year to year.

How to compute your net worth.

Basically you add up everything of value and subtract what you owe. There are computer programs you can use to plug it in; just search net worth calculator for some examples.

You could also make a list of all of your accounts and add them together. Examples include:

Savings accounts
Checking accounts
Retirement accounts (401k, IRA, etc)
Stocks and bonds
Mutual Funds
CDs (certificates of deposit)
Value of your home
Value of your car

You could also include any valuable jewelry or artwork you may own.

This is your total assets.

Then list all of your liabilities aka debts and add them together. Examples include:

Balance on your mortgage
Home equity loan
Car loan
Student loan
Credit card debt
Personal loans

This is your total liability.

Now take your total asset amount and subtract your total liability. This is your net worth. Hopefully it is a positive number. If not, it shows you what you need to work on.   More importantly, it gives you a number to focus on. If nothing else, it is knowledge and knowledge of your financial health can only help.

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