As promised, this time we speak about net worth. Net worth is the amount by which your assets surpass your liabilities. To put it simple, net worth is the difference between what you own and what you owe. You have a positive net worth if your assets surpass your liabilities. Conversely, you have a negative net worth if your liabilities are bigger than your assets.

Your net worth gives a picture of your current financial status. If you calculate your net worth right now, you'll see the end outcome of all you've made and spent up to this point. While this number is useful. For example, it might serve as a wake-up call if you've gotten entirely off track or a "great job" confirmation if you're doing well. Tracking your net worth over time provides a more relevant picture of your finances.

When evaluated on a daily basis, your net worth can be considered as a financial report card that helps you to evaluate your present financial situation and determine what you need to do to achieve your financial objectives. For many people, this helps them quickly turn their negative net worth, to positive, and eventually helps them become much more than they thought they could achieve.

So, look at the simple formula. Asset – Liabilities = Net Worth Your assets are something that you own has its value and can be turn into cash. Investments, bank and brokerage accounts, retirement money, real estate and personal goods (cars, jewellery, and collectibles), as well as cash, are all examples. Intangibles, such as your personal network, are occasionally considered assets. On the other side, your liabilities indicate your debts, such as loans, mortgages, credit card debt, medical costs, and student loans.

When you see financial patterns written in black and white on your net worth statements, you're forced to face the facts about your financial situation. Monitoring your net worth statements over time might help you figure out 1) where you are, and 2) how to get to where you want to go. This may both cheer you when you're on the proper road (i.e., reducing debt while increasing assets) and serve as a wake-up call when you're not on track.

Knowing your net worth is important because it can assist you in identifying areas where you are overspending. You don't have to buy anything just because you can afford it. Consider whether something is a need or a want before making a purchase to avoid accumulating debt unnecessarily. Your net worth data might serve as a motivator to save and invest. If your net worth statement shows that you're on track to reach your financial objectives, you may be encouraged to keep going. If, on the other hand, your net worth shows potential for development, it can provide the motivation you need to save and invest your money more aggressively.

Have you found out what is your net worth already? Take out a paper, a book, start calculating it, and most importantly, do not stop there. Once you find out your net worth, take some actions to improve it. Good luck!