What Are You Worth?
To gauge your financial health, itís a good idea to keep close track of your net worth. This doesnít mean what youíre worth as a person. Net worth is the value of your personal finances.
One way to understand it is to imagine yourself as a business. To figure out how much a business is worth, you would add up everything the company owns and subtract from that total everything that the company owes.
Net Worth = Assets - Liabilities
Your assets are everything that you own. They may include your house, car, furniture, motorcycles, trail bikes, camping gear Ė anything thatís worth money. Assets also include all savings, cash on hand, and investments. Even the stuff you still owe money on is included.
To determine your total assets, figure the appropriate market value of everything you own. Consider how much an item might fetch if you were to sell it online. Be honest and realistic.
You can even go a step further and figure out future assets. If you have money in an interest bearing account, or in investments, you can calculate how much your money will grow.
Your liabilities are everything that you owe. Theyíre the total amount you would need to pay off your mortgage, credit cards, student loans and loans from family and friends. Be sure to include any interest and finance charges. This information is typically included on your monthly statements.
As with assets, you can also track liabilities into the future by calculating your repayment rate and projecting when your debts will be paid off.
Ideally, you will have more assets than liabilities. As you grow older and advance in your career, youíll earn more, reduce debt and increase savings.
Age Median Net Worth
|Less than 35||$9,300|
|75 and older||$216,800|
Saving money is the most powerful tool for generating personal wealth. And itís even more powerful when youíre young. Thatís because the more time you have to earn interest, the more wealth youíll acquire.
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