You may have heard the phrase “net worth” before, in reference to a large company’s value, or the impressive wealth of a celebrity; but do you know specifically what “net worth” refers to, or how this term is relevant to you?
Both individuals and businesses have “net worth,” which is used as a measure of how much an entity is worth. It is calculated by subtracting all liabilities from all assets, or, by subtracting the amount someone or something owes from the amount of what they own.
Assets can include real estate, investments, such as bonds and mutual funds, personal property, like jewelry and household items, and cash. Liabilities include mortgages, loans, and credit card debt.
Let’s calculate a couple’s net worth. Their assets include a home valued at $300,000, an investment portfolio with a market value of $25,000, and other assets, like automobiles, valued at $30,000. They owe $150,000 on their mortgage and $10,000 on a car loan. Their net worth would be calculated as follows:
Assets: $300,000 + $25,000 + $30,000 = $355,000
Liabilities: $150,000 + $10,000 = – $160,000
Net Worth: $195,000
A consistent increase in net worth is an indicator of strong financial health. Try to reduce your liabilities to offset any decrease in the value of your assets, and to increase your worth! To learn how to boost your net worth through improving your financial life and launching an exciting second career, visit Syncis at http://www.syncis.com/blog/