Know Your Net Worth
There are many elements that make up your financial position. They can be categorized as the things that you own (assets), and the things that you owe (liabilities). These assets and liabilities include: your savings and investment accounts; the market value of the property that you own; the outstanding debt on that property; amongst other things.
Net worth summarizes your financial position into a single value. In short, it is your total assets minus your total liabilities. Put another way, it is an estimate of the value that would remain if you liquidated your assets to pay-off your liabilities.
If the total value of your assets is greater than the total value of your liabilities, then you have a positive net worth; which means that you have an option to live debt-free. Conversely, if the total value of your liabilities is greater than the total value of your assets, you have a negative net worth; meaning that if you liquidated all of your assets you would still be left with debt. For reasons that should be obvious, a positive net worth is most preferable.
Knowing your net worth should be the starting point for your financial planning and budgeting efforts. Your current financial position, tells you where you are; and this is key to helping you determine what is necessary to get you where you want to go. You can then manage your financial goals, based on your financial realities.
Your net worth is a measure of your financial well-being at a specific point in time. It is advisable to calculate and compare your net worth at different points in time as a way of tracking your financial progress, over a period of time.
The calculation is a simple matter of totaling your assets; and then subtracting your liabilities. The greatest risk is failing to include all pertinent financial information. For your convenience, you can click ... to access our net worth calculator.