Placement #16111078

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    Net worth & its calculation

    To calculate correct net worth all the items of value should be added to assets. True assets are those, which can be sold at any time, and someone else will pay you well to acquire these items. Cash, savings in your saving and emergency account, investments, retirement funds, home, furniture, and nice pieces of jewelry, collectibles and antique items fall into this category. All type of loans and advances which you have to pay either in installments or at a time, all type of mortgages you have made and all debts related to your credit card, whether created by purchasing anything or interest and penalties due to not paying your dues in time will fall into the category of liabilities. A car loan is a liability but its present value should be included in assets. Here it should be kept in mind that car is a depreciable item, its value decreases every year, and you should consider its present value only, when you are adding it in assets.

    Periodicity of calculating net worth: It is not advisable to calculate your net worth at daily or monthly basis. Once or twice a year will suffice the purpose to know the balance sheet of your financial health or to ascertain that you are making financial progress or not. Even if it is negative you will feel good by watching it coming closer to zero, this is also a sign of financial progress which you are doing gradually. Net worth also indicates, how strong or weak the party is for lending purpose, and almost all banks and other financial institutions view it seriously before financing a company or individual. Net worth also is a clear indicator of credit score.

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