“Net Worth” – a common term we usually come across on several social media platforms, business magazines and newspapers - “Know XYZ Celeb’s Net Worth!” But what exactly is net worth? Financial experts say net worth is the amount by which their assets exceed their outstanding liabilities.
However, computing net worth is not limited to celebrities or popular people. You can determine your net worth and determine your financial health. Interested to know more about your net worth? Read on!
First Things First… Why Should You Know Your Net Worth?
Here is a thing, when you estimate your net worth, you get an idea about what you have at your disposal. Listed below are some concrete reasons why you should determine your net worth -
- It is one the most precise representations of your wealth or financial positioning.
- It reveals problems that you never knew existed and enables you to confront the hard facts. Say, when you estimate your financial health a.k.a. net worth, you might realise the dream house is still down the long road as your current liabilities need to be handled first.
- Your net worth helps in putting things into perspective, i.e., you get an understanding of your assets and liabilities.
- Regularly reviewing your net worth makes it easier to track your financial health every now and then.
The Fun Part… Calculating Your Net Worth Like a Pro!
Before diving into the big calculation, it is important to understand that net worth is not your income. It is more than that. Here’s how to calculate your net worth like a Fortune 500 financial analyst.
- Step 1 - Add the assets valued at the current market prices. These assets include the existing market value of stocks, fixed deposits, bonds, vehicles, or property that you might own. Once you figure out the market value of these assets, add them up to know their worth.
- Step 2 - Add all your financial obligations including car or personal loans, credit card balances, and mortgages. The number you get comprises of your total liabilities.
- Step 3 - Once you compute the two figures, subtract the total asset value from the total liability amount. This is the amount you would be left with after paying off your debt.
| Does Your Net Worth Change with Time? |
|---|
|
Just like your age or weight changes over your life, your net worth – including your liquid net worth – also changes based on your income and spending patterns. For instance, as you pay off a mortgage or a car loan, your debts decrease and your net worth could go up. Doing these calculations regularly, like once a year, can show if you are getting better financially or if you are not reaching your goals. This helps you use your net worth as a tool to check your financial plans often and make any needed adjustments. So, keeping track of your net worth can help you see how well your financial strategies are working over time. |
Hacks to Increase Your Net Worth
As you keep lowering your debts and your belongings become more valuable, your overall financial worth will increase over the years, making your money situation better. Here are some suggestions to make your financial worth better:
- Use a mobile application to keep track of your financial worth often.
- Focus on paying off debts and think about merging loans or mortgages.
- Choose savings accounts that earn more interest than regular ones.
- Have a well-organised plan for investing that includes different types of things you own, based on how much risk you're comfortable with.
- Put any extra money like bonuses or raises into accounts for emergencies and investing.
- Seek advice from money experts to create a special plan for investing that fits you.
Looking at clear financial patterns in your net worth statements makes you face your financial situation directly. When you regularly check these statements, you can figure out where you are financially, and how to reach your goals. It can motivate you when you're making progress (like lowering debt and increasing savings) and show you the reality if you're not doing well.
Policybazaar UAE – Helping you navigate the wilderness of the insurance world!
Written By - Tanvi Pathak
- Latest News & Update
30 Jul 2024From Revenge Spending to Revenge Savings - A Classic Way to Move On!Discover the art of revenge savings and revenge spending on our website. Find classic ways to move on and take control of your financial future.
30 Jul 2024Save Your Emergency Funds with ‘Sinking Funds’ - A Budgeting TechniqueThis is a strategic way to manage your monthly budget by setting aside a small portion of money per month. You can use the money kept aside for buying car accessories, Christmas gifts, vacations, stationery and more.
30 Jul 2024Three Ways to Put Your Eidi Money to a Fulfilling UseOn the occasion of Eid whether it be buying new clothes and indulging in sumptuous food, it is definitely on everyone’s to-do list.
06 Mar 2024Women in the UAE Making Significant Strides in the Finance IndustryStatistics reveal that women constitute 70% of the workforce of nationals employed in the banking field in the UAE. It is noteworthy that it is by far one of the highest representation of working Emirati women across all sectors.
07 Mar 2024#Inspire Inclusion and Financial Freedom - Women’s Day 2024This year, on Women's Day, we are all about including women in finance. We cannot ignore them and we must do our best to make sure that they are financially empowered and are able to make the most of their savings.
07 Feb 2024Loud Budgeting: The ‘Gen Z’ Approach Towards Financial ManagementThis article discusses the Loud Budgeting trend and how it is beneficial for the Gen Z. It also highlights the reasons why the trend is beneficial for the common public.
