Calculate Your Net Worth to Gauge Your Financial Health
As you earn a regular income, calculating your net worth on a regular basis becomes helpful and informative. This practice will benefit you for years to come by providing a snapshot of your financial health based on the value of your assets minus your liabilities.
Your major assets include cash, stocks, bonds, retirement accounts, annuities, real estate holdings, vehicle, and any valuable collectibles or home furnishings. Your liabilities are your mortgage, loans and credit card debt, or anything that requires you to pay money toward it, including your everyday consumer spending.
If you’re a recent college grad in the Bay Area or young professional in Silicon Valley, don’t be alarmed if you find yourself with a negative net worth when you work through a net worth calculator. If you’re interested in diving deep into the details of your net worth, Investopedia offers an eight-part guide with thorough explanations.
A negative net worth early in your professional career simply means you haven’t earned enough money and assets to outweigh your obligations from student loans and other debts. This is nothing to fret about right now.
But this process is beneficial to monitor how you reduce your expenses and spending while enhancing your asset base. The calculation provides a mental boost when you make progress and shakes you into reality when you see yourself consistently spending more than you’re earning. Overall, your net worth reveals where you are trending financially and whether you are on track toward your financial goals.
As you analyze your numbers, you’ll see how your net worth increases by paying down debt, spending less, and saving and investing more money. Use this information to create a blueprint for what you want to achieve financially in the short term and long term.