Determining Your Net Worth and Why It’s Important
Many of you ask questions in regard to building your credit score, and that is very important. However, I rarely hear from clients and followers the question of; how to build their Net Worth.
I once thought the only financial responsibility I had was to make sure to have a high credit score. This lead me to believe that if I maintained such a high score that I would be able to borrow my way to riches. Thousands of “borrowed” dollars later, I found myself with a negative net worth of approximately -$65,000.
First, add all of your assets together. This includes your home, vehicle, bank accounts, retirement accounts, etc.; Anything with a positive value. Now, some people like to get technical into all of their belongings such as the TV’s, couches, beds, and the family dog, but I don’t recommend this because that will skew your numbers. I recommend sticking with assets that have significant value, that can be sold for a similar amount, and be backed by factual data such as Kelly Blue Book for cars and Zillow for homes. Let’s keep it simple!
“Today, I am debt free with a positive net worth, and want to share with you quick and simple way to calculate your personal net worth.”
Next, you will calculate all of your debts, or better known as liabilities. This includes student loans, mortgages, credit cards, collections, overdue tax bills, and everything other debt you owe. Do not exclude something just because it doesn’t appear on your credit report.
Finally, you will have two numbers. A number for assets, and another number for liabilities. Subtract your assets from liabilities and this will give you your net worth. What is your number? Is it positive or negative?
Great job if you are in the positives! If you are in the negatives like I was a year ago, don’t get discouraged. Look at this as an opportunity to turn your finances around for the better. If you need help creating a financial plan, reducing your debt, or any other personal finance tips, contact me anytime! Hope to hear from you soon!
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