Discover the Secret to Unveiling Your Financial Freedom: Assessing Your Net Worth

Want to understand your financial position? Try finding out your net worth! It’s an essential tool for tracking your financial health, way more telling than just how much you earn per year. Not many people are aware of this, so why not get a head start?

Discovering your net worth is a piece of cake. It’s straightforward maths: you subtract your debts (what you owe others) from your assets (what you own). You can use calculators or free apps like Empower to make life easier.

Here’s a recommendation: aim to increase your net worth. How can you do that? By either boosting the value of your assets or reducing your debts.

Keeping an eye on your net worth can be a great motivator. It’s like a progress meter, showing you where you stand in your financial journey. If you’re saving up for retirement, knowing your net worth can help you assess how close you’re to your goal.

So, how do you calculate net worth? Follow these simple steps:

**Step 1: List Your Assets and Their Value**

First, jot down all your assets. This includes stuff like the value of your home, bank account balances, 401(k) account, IRAs, your car, and any other investments or valuable possessions. Exclude trivial items, focusing on significant value assets, such as valuable jewelry or artworks if you own.

**Step 2: List Your Debts and the Amounts**

Next, it is time to list down all your debts: mortgage, car loans, credit cards, student loans, and any others. Totalling up these debts will give you your overall liability.

**Step 3: Subtract Your Liabilities from Your Assets**

Finally, subtracting your total debts from your total assets will give you your net worth. It’s okay if this is a negative number, especially for young people who might have student loans. The aim here is not to stress but to understand your financial standing.

Let’s understand this better with an example. Suppose Brian, an imaginary guy, has assets worth $294,500 and debts amounting to $196,000. His net worth would be $294,500 – $196,000 which equals $98,500.

Calculating your net worth isn’t a one-time thing. It’s good to track it regularly, say monthly, to understand your financial progress. It’s also an excellent motivator toward personal or family financial goals. Tools such as the free Empower account can automatically do this for you.

As I mentioned before, the objective is to increase your net worth. As you work toward that, you might find some useful resources and articles here that can help you earn or save more money.

So why wait? Take the first step today to calculate your net worth. You could use an app, a spreadsheet, or even just a pen and paper. What matters is not how you do it, but that you do it! Knowing your net worth will give you a clear picture of where you stand financially today.