What’s your net worth and why does it matter?

What is your net worth?
Your net worth is how much you are worth, as in if you sold all your assets, how much cash would you be worth? In my last post I talked about my financial goals to pay down debt (was $20,059.38* 12 days ago), increase my income to $2,000 per month from home and save $10,000. All of these are great and help me get financially free. A larger overarching goal is to increase my net worth to $1,000,000. This is what I am aiming for as my personal net worth. Everything I write here is based on my income, my net worth etc. Not mine and my husbands combined.

How to calculate your net worth and why it matters

How do you calculate your net worth?
To work out your net worth, add up all your assets such as properties, savings, any 401K or retirement funds, shares, businesses, collections (such as art) and cars/boats/caravans etc. Next add up any debt such as a mortgage, personal loan, credit card etc. Take the total of your assets and subtract the total of your debt from it. The remainder is your net worth.

For example, I don’t own a home or shares, so my net worth calculations look like this:

Savings: $505
Retirement funds: $7,602
Collection: $8,000
Car: $2,000

Total: $18,107

Personal loan 1: $15,532.96
Personal loan 2: $4,050.60

Total: $19,583.56

Assets ($18,107) – Liabilities ($19,583.56) = -$1,476.56

Do you see that? My net worth is in the negatives!

One ‘asset’ I haven’t included is money owed to me. As there is no guarantee this will be repaid (even though it should be), I don’t include it. Some people do because technically it is money you can call on, I am not comfortable doing that, though. I don’t rely on anything I don’t have in my hand. Currently, I am owed $4,370 which would out my net worth back into the positives.

Why does your net worth matter?
As you can see from working out my calculation above, if everything in my life fell to pieces, even if I sold it all off, I would still owe money! That is no way to live. Income can fluctuate and many spend as much as they earn. Income is not a great indicator of wealth. Your net worth shows your true financial position.

When was the last time you calculated your net worth?

*12 days ago I owed $20, 059.38. As you can see from my net worth calculations, I have dropped my debt to $19, 583.56 in 12 days, a difference of $475.82. I’ll be doing monthly updates on my debt, income, savings and net worth goals and will share then how I paid off nearly $500 within 12 days.

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