An important step in developing your financial plan is knowing your net worth. Your net worth is a combination of what you own (your assets) and what you owe (your liabilities).Your net worth helps you know where you are, so you can decide where you want to go. It helps you understand your current financial situation and gives you a starting point for measuring your progress towards your financial goals.
When we started our financial journey, our net worth was at a negative. That helped us determine what our starting point was, and we were able to set our financial goals based on the life we wanted to create for our family.
To calculate your net worth
1. Add up all your assets (what you own). These include:
Money in your retirement, investment and bank accounts
Bonds
Stocks
personal items/jewelries
Market value of home
Your cars
Cash value on any insurance property
2.Add up all your debts also known as liabilities: These include :
Credit card debts
Mortgages
Student loans
Car loans
3.Subtract liabilities (debts) from the assets
To improve your net worth
Get on a budget and stick to it
Develop a financial plan
Earn more
Save more, spend less
Get out of debt
Start by calculating your net worth and then work on developing a plan to improve it.