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MONEY TALK

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3 Step Net Worth Formula: What is Your Total Net Worth?

Man types on computer, looking at a growth chart which shows his net worth growing

Oprah Winfrey has a net worth of $2.4 billion and George Clooney’s net worth is estimated at $500 million.

Do you know how much you’re worth financially?

Knowing your net worth will give you an accurate snapshot of your financial health.

Check out our 3 step net worth formula and find out how rich you truly are…

Your net worth is a fancy word for your real wealth. And it’s the most accurate way to find out your true financial position. Wealth isn’t just about how much you earn. It’s about how well you’ve spent the money you’ve earned up until now, and how it will affect you for years to come.

Calculating your net worth will confirm either one of two things;

You’re not spending your income wisely, and this is a wake-up call

OR

Your finances are looking drop dead gorgeous (if this is the case, you can give yourself a well deserved high five)

Whatever the outcome, you will know your true financial position. And that’s one step closer to managing your money more successfully to grow your net worth.

 

3 Step Net Worth Formula

So, what is net worth exactly?

To put it simply;

So, let’s break it down.

They say that cash is king. But not all cash is made up of Rands and Cents.

Property, retirement funds, brokerage accounts, vehicles, jewelry, collectibles or any cash is an asset.

Basically, anything that you can exchange for cash is called an asset.

These are all the things you own.

Liabilities are things we don’t own. These are things like debt. This includes all loans, mortgages, credit card debt, medical bills or student loans.

Now, let’s calculate your net worth.

 

1: List everything you own

Start by making a list of all your assets. Start with your most valuable possessions.

Any property or vehicles that you own. If you have any valuables like jewelry, paintings, a coin collection, heirlooms etc. put that on the list as well.

Don’t forget to include all your liquid assets. These include any savings accounts; brokerage accounts or retirement accounts you may have. Or alternatively, anything you can sell for cash at a yard sale.

If you can exchange it for cash, it’s liquid.

Now that we have everything listed. Start valuing your list.

Remember to make your valuations as accurate as possible. If you overestimate your assets, you won’t have an accurate financial health estimation. So, rather ask the experts where necessary.

Now that the difficult part is done. Add your list together.

This will give you the total value of your assets.

 

2: List everything you don’t own

We all have stuff that we don’t own, yet. That’s called debt.

Make a list of all your debt. This includes the big stuff like mortgages or car loans. And even the smaller things like credit card debt or student loans.

If you have a big liabilities list, we need to talk.

Once you have your list complete. Add it all up. That’s total liabilities done.

It’s time for the big reveal…

3: Calculate your net worth

This part is easy. Calculate the difference between your total assets and total liabilities. This will give you your net worth.

Assets – Liabilities = Net worth

Don’t be alarmed if you end up with a negative number. Most of us do. But the aim of the game is to lower your liabilities and increase your assets.

The idea is to track your financial health and try to improve year on year. If you do it right, you should have debt-free assets, that earn an income.

Bad Debt Lowers Your Net Worth

Not all debt is bad. A house will increase your net worth as you pay off the mortgage. However, credit cards, store cards, and even vehicle finance can drastically lower your net worth. This type of credit allows you to purchase items which decrease in value. And to make matters worse, will continue costing you in interest.

So, pay off that bad debt and start growing your net worth.

If you’ve calculated your net worth and your finances aren’t in shape, don’t worry. It’s a gradual process. But if you have a lot of debt and you struggle making repayments every month, it might be time to get some help…

Contact us today and let us help you get rid of debt that will cost you your wealth.

Need immediate financial help?

Thank you!

We look forward to the opportunity to get you debt-free!