Are you in a financially strong position, or are you heading for a late retirement down the track?
Your financial ‘net worth’ is simply your assets minus and liabilities you have, giving you your true financial status.
Savingsguide.com.au has put together 3 steps to find out how much money you really have.
1. Calculate the value of your assets
What assets do you own? Do you have a car, house, trailer, boat, shares, and so on?
Assets also include savings accounts, term deposits and other investments.
2. Calculate your liabilities
Liabilities are any type of debts – car loans, personal loans, credit cards and mortgages.
3. Calculate your net worth
How much money would you have left over if you sold all your assets and used the money to pay all of your debts?
Simply subtract total liabilities from total assets = this is your net worth.
How to increase your net worth
According to Savings Guide.com.au, your goal should be to increase your net worth in two ways.
Growing your assets: ideally you need assets other than cars and boats, as these assets will depreciate over time – you need assets that grow in value over the longer term, things like property, shares, savings accounts.
Reducing your liabilities: pay off credit cards, pay off personal loans, make voluntary lump sum repayments to any debt you have to rapidly pay it down. Like any debt repayment strategy, it’s often wise to focus on the debts that cost you the most first (e.g. prioritising a high interest credit card over say a student loan debt).