Did you know that the most accurate measurement of wealth is by knowing your Net Worth? This means that even if you are getting a high salary every month yet your liabilities are higher than your assets, then you are BROKE.
So the question is, how WEALTHY are you anyway? Have you calculated your Net worth? Have you even started one yet?
Your net worth can be an extremely useful tool in measuring your status and overall financial progress from year to year. How well have you been doing financially? Have you been doing great this year or not? Allow me to help you determine that.
How to Calculate your Net Worth Philippines
Basically, your net worth is the difference between
what you own (your ASSETS ) and
what you owe (your LIABILITIES).
It is a realistic view of your current financial health because it says what you would have left over if you sold all of your assets to pay all of your liabilities.
Every financial move you make should be aimed at increasing your net worth. This means either increasing your assets or decreasing your liabilities.
Why is it important to know my Net Worth?
Knowing your net worth is important for 3 reasons:
- 1. It lets you understand your current financial health.
- 2. It gives you a reference point for measuring progress toward your financial goals
- 3. It will reveal if you have too much debt or if you have too much of any one asset.
Net Worth Formula:
Your Assets – Your Liabilities = Your Net Worth
So if you have assets worth P150,000 and your Liabilities sum up to P150,000 as well, then you have a Net Worth of P0.00.
If you have assets worth P150,000 and your Liabilities sum up to P200,000, then you have a Net Worth of -P50,000.00.
Yes, you can definitely have a negative net worth.
So, how do you figure out your Net worth?
This may seem like a chore at first but once you have everything written down then it’s gonna be easy peasy when you update it from time to time 🙌
STEP 1. List your assets (what you own), estimate the value of each, and add up the total. Include the ff:
- *Money in your bank accounts
- *Value of your investment accounts
- *Receivables
- *Time deposits
- *Your car
- *Market value of your home
- *Business interests
- *Personal property, such as jewelry, art, and furniture
- *Cash value of any insurance policy
STEP 2. List your liabilities (what you owe) and get the outstanding balances. Include the ff:
- *Mortgage
- *Car loan
- *Credit card balance
- *Personal Loans
- *Loans to other people
STEP 3. Subtract your liabilities from your assets to determine your personal net worth.
Here’s an example of my personal Net worth Tracker:
This is what I personally use and I hope you find this helpful too. With this Net Worth Tracker, I am able to see my financial standing at a glance. This is actually downloadable since I would love to share this to my readers. 🙋
Do you want to use a Net worth tracker too? Go ahead and Download it HERE.
As you can see, there is a column for Month A and Month B. I personally compare my net worth monthly but it’s up to you on how frequently you’d want to track yours.
Tip: When estimating the values of your Assets, do it conservatively. Estimating too high may make your net worth attractive but it may also not reflect the true and realistic value.
What does it mean when I have a negative Net worth?
- This means that you haven’t earned or invested enough money yet to overcome the weight of your loans/debts.
- It can also be due to overborrowing. If you’ve racked up huge credit card bills, and are not paying them religiously, this creates a large number in the liabilities column.
- You should increase your assets to offset your liabilities to come out with a positive Net Worth.
How has tracking my Net Worth benefited me?
- It has helped me to find more ways to increase my income
- It has helped me to be more careful with what I spend on. E.g. food, commute fare.
- It has motivated me to learn more about investments to increase my Assets.
Calculating your net worth as early as now holds you accountable and helps keep track of your financial goals. I hope everyone finds the Net Worth Tracker included above, helpful and easy to utilize so you can know what your financial standing is.