How to Calculate Your Net Worth

Calculating your net worth is pretty easy once you have all the details required and if we were to read from Forbes magazine or other business magazines, we will always see the rankings of the richest man in the world in terms of 'Net Worth'.

If you were to look at the current list below, these are among the richest people in the world according to the Forbes list.

What is Net Worth?

Net Worth can be defined in simpler terms as the wealth value of someone. In a complex manner, Net Worth is the total asset minus liabilities, therefore you get the net wealth owned by the person.

For instance, if you still pay for the loan of your car and your house then this will be considered your liability until you paid the loan in full.

Whereas, other assets like gold, cash, investments, income from house-rents, vehicles, shares, land, royalty, business, the cash value in insurance, dividend, bonus, self-branding, websites, blogs as well as heritages property will be your personal assets.

There is even a Net Worth calculator so you can easily get your estimate Net Worth.

Net Worth Calculator

Ways to Increase Net Worth

The simple way to do it will be to increase your assets and/or reduce your liabilities(debts).

But reducing your liabilities will be limited since the smallest amount of debt you can have is 0 and we know that it is not realistic to have 0 debt. On the other hand, you can increase your assets to an unlimited amount of time and there is no upper bound for it. The question will be how to increase those assets?

Thus, proper money management is crucial in order to maximize your assets and reduce your liabilities.

Your Net Worth at Age 40?

According to listenmoneymatters.com, the suggested value will be $35,000. The target for those 30s is to get a total Net Worth of 2x their annual salary at the age of 40. For example, if your current income is $50,000 a year, then at the age of 40, you should have a Net Worth of $100,000.

Importance of Net Worth

It is rather important when you are trying to make a decision regarding an investment. Let's say that you want to buy a company's shares. Of course, you will take into account the company's monetary performance by simply looking at the balance sheet. Then, you can decide whether it is worth it to buy the company's shares.

If the company has low debts/liabilities, it will also mean that the company is making more money rather than constantly on loans.

Knowing your Net Worth is not just determining how much you have but it also shows your financial state currently and whether any improvements can be made to increase your overall Net Worth. We can also set goals on how we can achieve a particular Net Worth and prevent ourselves to be full of debt.

What is your current net worth?

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