Calculating your Net worth
You may often have come across the term “Net worth”. Your Net Worth provides a snapshot of your financial situation at any point of time. Whether you want to avail a loan or for other financial purposes, the calculation of the same becomes important. We at “The Accounting & Tax” have been in the field of finance consultation since long. Through this article, we will provide you with a basic understanding of how to calculate your net worth.
Net worth in simple terms
According to the financial experts in Canada, Your Net Worth is the amount by which your assets exceed your liabilities. In other words it is the difference between what you own and what you owe. In case your assets exceed your liabilities, then you have a positive net worth. On the other hand, if your liabilities are greater than your assets, you have a negative net worth. If this calculated periodically your net-worth can be viewed as a financial health report and what steps you need to take to achieve your financial goals.
The Actual Calculation of your Net Worth
- Make a list of all your assets:
Your assets may be Immoveable Assets. These include your properties. These may be jointly owned. In such cases you need to arrive at your portion’s worth. Along with these there are the moveable assets as well. These are your financial assets e.g. your current and savings bank account balances. It also includes your bank fixed deposits, shares or stocks held by you. You may also be the owner of certain businesses. In such cases the capital invested is also a part of your moveable asset. The total value of each of these individual assets needs to be added and the final figure arrived at. This would give you the total value of all your assets.
- Make a list of all your liabilities
Your debts are your liabilities. So any type of loan which you might have availed like home loan, auto loan, personal loan, student loan is all your debts and liabilities. These would also include the outstanding balances of credit cards which you might be holding.
- To arrive at your net worth just subtract
To arrive at your Net Worth you just need to subtract or deduct the value of your liabilities from your assets. In case you have a negative balance, it means that you have a negative net worth.
In order to improve your net worth you need to add to your assets and reduce your debts. So you must always look to it. This is what will also determine your creditworthiness and thus help you avail loans in case you need it.
To conclude we hope that we have been able to provide you with a basic understanding of the term net worth and how it is to be calculated. In order to have the best financial consultation in Canada and USA both as an individual or as a business house, get in touch with us at “The Accounting and Tax”.
