Why net worth is essential to measure your wealth and how to calculate it

19.07.2020 | Financial Education

There are quite a lot of ways through which we measure our wealth, but the most popular are usually totally wrong. 

Most of us assume that the more someone has, the richer they are. The only thing that counts is a visible sign of wealth. That’s why we have so many problems with debts – because we believe that other people should see (and, of course, admire) our wealth. 

We have, however, one great tool that helps us properly understand how we should measure personal wealth: net worth. 

Your net worth is your assets minus your liabilities. 

 

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What are assets? Assets are tangible or intangible resources and values you have, anything that has any monetary value, such as savings, bonds, properties, cars, precious metals, patents and any intellectual properties. 

What are liabilities? Liabilities are your debts, mortgages, taxes and everything you owe. 

The simplest way to calculate your net worth is to imagine that you need to sell everything you have. How much money you would have if you sold everything and paid all your debts? Would you have some money left over, or would you be in debt? 

It is rather easy to calculate your assets; all you need to do is list all you have and then carefully estimate their value. Be aware, though, that what happens quite often is that those things that hold a special value for you might have moderate value when you are trying to sell it. 

Here is your net worth calculator.

 

Andrzej Manka

Andrzej Manka

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