Do you know what your net worth is?
Think of it as a financial report card. It’s something that you need to evaluate so you can figure out what you need to do in order to reach your financial goals.
Net Worth = Assets – Liabilities
Your assets are anything that you own that has a cash value. Investments, bank accounts, brokerage accounts, any retirement accounts, real estate, personal property, and cash.
Your liabilities are your loans, mortgage, credit card and other debt, medical bills, or student loans.
For instance, if you have $2,000,000 in assets and $1,000,000 in liabilities, your net worth is $1,000,000. But conversely, if you have $2,000,000 in liabilities and you only have $1,000,000 in assets, you have a negative net worth.
Everyone’s net worth fluctuates over time. It goes up and down depending on your financial situation at any time. If you’re starting out as a young person, your net worth is (hopefully) going to increase as you age. Then when you get to retirement age, your net worth has a tendency to decrease because you’re using some of your assets to live on.
If someone has a negative net worth, it doesn’t necessarily mean that they’re irresponsible. It literally just means that they have more liabilities than assets right now. That said, it’s not an enviable position to be in. If you would like to turn around your net worth, a daily money manager may be the key to getting it done. Contact me to find out more.