How to Calculate Your Net Worth and Why It Matters

Wealth is often associated with lavish spending and an extravagant lifestyle. However, true wealth is measured by your net worth. If you want to get a handle on your finances and get ahead financially, you need to know your net worth. Your net worth is what's left of your current assets after you subtract your liabilities. In other words, it's what you own minus what you owe.

To calculate your net worth, start by making a list of all your assets. This includes your home, any property you own, savings accounts, stocks and investments. Then, make a list of all your liabilities. This includes your mortgage, credit card debt, student loans and any other money you owe. Finally, subtract your liabilities from your assets.

Why is knowing your net worth so important?

Because it gives you a clear picture of your financial health. It's a snapshot of your assets and liabilities at a given point in time. And it's a useful tool for setting financial goals. For example, if you want to retire with a certain amount of money, you can calculate how much you need to save each year to reach your goal. Knowing your net worth can also help you monitor your progress over time. If you're working towards a financial goal, you can track your net worth to see how much closer you're getting to your goal.

How to improve your net worth?

The first and most important step to increasing your net worth is to pay off your debt. This includes things like credit card debt, student loans, and any other kind of debt that you may have. Paying off your debt will not only reduce your liabilities, but it will also free up more of your income to save.

Assuming you now have a good handle on what your net worth is, it’s time to start thinking about how to increase it. The first step is always the hardest, but once you get started, you’ll be surprised at how easy it is to make small changes that can have a big impact on your net worth. Remember, your net worth is a reflection of your financial health, so make sure to keep it in good shape and if you're not happy with your current net worth, use it as motivation to make some changes in your life.

Challenge: If you've never calculated your net worth before, use the steps above to do so and drop an emoji in the comments when done. You don't have to share your numbers but hopefully, this quick read will get you thinking about some things you didn't even know you needed to think about.

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