Either you heard in on the news or a movie, or maybe you heard your neighbour talking about it, well below we will explain what net worth is and how you can calculate a person’s net worth and then we discuss how you can build your net worth.
Net worth is what you own, these can be things such as your home and vehicles minus what you owe on these items. Another way to describe net worth is the value of all your assets minus your liabilities.
Another easier way to understand what is a person’s net worth is, if you have to sell everything that you own, the amount that you have left is your net worth. Your net worth can either be in the positive or negative depending on your assets and liabilities.
How can I work out my current net worth?
To work out your net worth is simple. Add up all the items that you own including the debt on these items. Some of these items will be your car, home, furniture and Jewlery, saved cash and investments.
Once you have them noted down you going to minus the liabilities from these items. This is usually any outstanding loans.
The formular is:
ASSETS minus LIABILITIES equals NET WORTH
How can I increase my net worth?
Growing your net worth is a great way to secure a future for yourself and your family.
You can start by saving money each month. It is recommended to put away a minimum of 10 percent of your salary each month. Over time this amount will grow and will form the basis of your future investments.
Once you are comfortable with saving money each month, you can now earn interest on that savings. Over time with the compounding effect, you will earn money on your money. You can find out more about compound interest here.
Another way you can start building your net worth is to purchase assets that increase in value, this can be anything from purchasing gold coins to real estate. Remember that some assets do depreciate in value such as cars. So, remember to do your research when investing.
