How to calculate your personal net worth?
Net worth tells you where you stand financially. It gives you a true picture of what you actually own. You might possess various assets due to which individual may think that he has enough assets to fulfill life goals but it isn’t true. Along with assets, an individual might have other outstanding liabilities. If liabilities are more than assets, then individuals will have to face severe consequences if they increase over a period of time. So, in order to keep a check over your financial status, you should calculate net worth. This is how an individual can come to know where he stands financially. So, now, the question arises as to how should one calculate net worth?
Net worth formula:
Net worth = Sum of all assets – Sum of all liabilities
Your personal net worth is a combination of the total assets you possess and what you owe. Understanding and knowing your personal net worth helps you in the following ways:
-
• It helps you to know where you stand financially.
-
• It will help you to check whether your liabilities are not going beyond your assets.
-
• It will give you a clear picture of whether you need to save more and spend less.
How to calculate net worth:
List down all your assets and then your liabilities and subtract the number of total liabilities from the amount of total assets.
For instance,
An individual has a house worth Rs 3 crore and a farmhouse worth Rs 70 lakh. He also has stocks worth Rs 50 lakh in his Demat account and other investments worth Rs 27 lakh. His business is worth Rs 8 crore as per the balance sheet. He has a home loan worth Rs 1 crore and a children’s education loan worth Rs 10 lakh. So, what will be the net worth of this individual?
