Ok, so I’m talking about financial worth. Because as far as personal worth, that is limitless. But back to your financial situation. Your worth is much more than the savings you’ve been able to squirrel away.
Net worth is the amount by which assets exceed liabilities. In other words, your net worth is the difference between what you own and what you owe
So why is it important to know your financial worth at any given moment? Because it will tell you where you are in relation to your goals. This is your reality check that says “Hey buster – better get making more income” or “Nope – you can’t buy that right yet.”
Determining your worth is an exercise that can include any number of decisions about any number of things that hold value. So what exactly are those things? Let’s take a look.
The Obvious – Your Pay or Earnings
How much do you bring home each month? This is your net pay (the amount left after everything has been deducted from your earnings). This includes money you receive from full-time, part-time jobs, or self-employed income (make sure you are deducting operating expenses from your self-employed income). The only amount you will include in your net worth – is the amount you actually save of your earnings.
Income From Property
Do you own real estate properties that you rent out for income? This could include a home, business or vacation property. And don’t forget about another kind of property – investment property such as stocks, mutual funds or income trusts. These should all have a positive effect on your income. Most of the successful wealth-builders have a multiple stream of income to achieve financial independence. Diversify your income in you can.
Real property is any land and any structure that is permanently attached to the land. This would include houses, barns, detached garages, and vacation properties. Remember, the net worth of the property is the difference between what it is worth and what you owe on it.
Everything you own that is not real property. A key characteristic of personal property is that it is movable, as opposed to a house and land which are not movable. Some examples are boats, cars, collectibles, furniture and jewelry.
When we look at our net worth as a dollar amount, it represents our financial health and is effectively the result of everything you have earned and spent up until now.