How to deriving your net worth? It is important as we need to know how the much money and assets we have. Let’s read this Step by Step on how to derive out net worth
STEP 1-List the things of value that you own
- Cash and its equivalent such as savings accounts, fixed deposits, money market accounts. You need to calculate it and find the total amount.
- Investment such as stocks, bonds, unit trust funds. Find all the latest statement. If you can’t find it, ask from your brocker/agent.
- Retirement funds such as EPF or your personal retirement accounts.
- Property including other real estate or personal property that will increase in value
- Personal belongings that can be sold for money such as jewellery, gold, art and antiques. (state them at fair market value)
STEP 2 – Total up your assets
- Calculate all of your assets and make sure the value is reasonable.
- If possible, find some expertise to calculate it.
STEP 3– List the Things that you owe to others
- Loans, including your mortgage,student loan, personal loan, car loan and other loans.
- Credit card balance that you owe. Make sure you know the amount or you can call the provider.
- Taxes owning, such as income tax, real estate taxes.
- Money owing to relatives, friends and others. It is important that you know how much money you owe from others. Don’t take it lightly as they could pray you to loss.
- Balance of instalment payments for consumer goods such as furniture, tv.
STEP 4 –Total up your liabilities
- You need to calculate the total amount of what you owe to others.
STEP 5 –Asset – Liabilites
- Calculate the amount. If the number is positive, pat yourself on the back. You should plan on how to increase your net worth. If the result is negative, don’t despair, because you can take actions to improve your score.
There are several ways you can increase your net worth. These include :
- Increasing your savings
- Reducing your spending
- Reducing your debts
- Selling some of your non-income generating assets/ belonging.
By deriving this net worth, you can get an idea of your financial position. To do this you must have proper budget.