Know Your Net Worth
February 26, 2008
Above: MONEY!
How is this crucial in the whole budgeting process? Knowing your net worth will let you know on where you exactly are. When you start to determine your means and ways to save you would have to deal with the bigger picture that starts it all, and that could only be found in… your net worth.
To make things simple and less boring in your eyes, you would need to focus on two things. One is your asset and the other one is your liabilities.
To start with is know your assets and to determine your assets you would have to consider your liquid assets first or the money you have at hand that can be used in spending. This includes your checking account, your marketing account balance, your savings, your life insurance’s cash value or anything that can be equivalent to cash. Gather them all together.
The other type of assets would be the ones convertible to cash; this can take form in possessions. An example of this would be the market value of your car, your jewelries, your gold, your home, land and the likes. Once you’ve put them altogether, try to estimate their worth and add them up.
The last but not the least of assets considered would be your investment assets. Examples of these are bonds, stocks, savings certificates, IRAs, Mutual Funds or other types of investments.
Once you’ve gathered up all these assets, it is time to add them all up.
You would seem happy once you started adding your assets and such, but the hassle start to turn in when you are actually about to compute for the other side of the sheet, and that would be your liabilities. These are your mortgages, your credit debts, your loans and such.
Now as you’ve defined how much is your assets and how much is your liability, simply subtract your assets with your liability then there it is, the outcome is your net worth.
The importance of your net worth will help you know the real score; it helps you go inside your starting ground in achieving your financial goals.
Posted by Budget Saver under Personal |