{"id":103,"date":"2008-01-28T23:37:41","date_gmt":"2008-01-28T18:07:41","guid":{"rendered":""},"modified":"2011-08-07T01:44:57","modified_gmt":"2011-08-06T20:14:57","slug":"your-personal-net-worth-importance-and-calculation","status":"publish","type":"post","link":"http:\/\/www.raagvamdatt.com\/your-personal-net-worth-importance-and-calculation\/","title":{"rendered":"Your Personal Net Worth \u2013 Importance & Calculation"},"content":{"rendered":"

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This article talks about the importance of finding your net worth, and explains how it should be calculated.
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We go to a hospital or the family doctor from time to time for routine check-up. Even when we are not experiencing any problem, we do it – just to ensure that our physical health is fine.<\/p>\n

As savvy investors, shouldn’t we do some kind of check-up to evaluate our financial health too? Just like a physical health check-up, is there something that can tell us where we stand financially?<\/p>\n

Yes, there is a tool available to find out just that – and it’s called Net Worth<\/strong>.<\/p>\n

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What is Net Worth?<\/strong><\/h2>\n

Net worth tells you where you stand financially. It is the sum of all your assets, less all your liabilities. It gives you the true picture of what you actually<\/em><\/strong> own.<\/p>\n

For example, you might feel happy that you own an apartment. Yes, that is something to feel proud about. But if you have taken a loan for buying it (that is, if you have a mortgage on it), isn’t that a liability tied to that home that you also have?<\/p>\n

Since Net Worth calculation considers both<\/em><\/strong> assets and liabilities, it gives a truer picture of your financial standing compared to any other tool.<\/p>\n

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Calculating Your Net Worth<\/strong><\/h2>\n

As such, calculation of your Net Worth is fairly simple. It is just the sum of all your assets less all your liabilities.<\/p>\n

Net Worth = Sum of all Assets – Sum of all Liabilities<\/strong><\/p><\/blockquote>\n

The problem is in recognizing the assets and liabilities!!<\/p>\n

Therefore, let me list down the items that you should consider as Assets, and the items that you should consider as Liabilities.<\/p>\n

{filelink=23}\u00a0Download the spreadsheet to find your Net Worth<\/span><\/p>\n

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What should you <\/strong><\/strong>consider as an Asset?<\/strong><\/h2>\n
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  • Market value of your house<\/li>\n
  • Market value of any land you own<\/li>\n
  • Market value of your shares \/ mutual funds<\/li>\n
  • Market value of your car \/ two wheelers<\/li>\n
  • Market value of your jewellery<\/li>\n
  • Cash in your bank account<\/li>\n
  • Cash at your home<\/li>\n
  • Fixed deposits (FDs) that you have<\/li>\n
  • Your balance in the Public Provident Fund (PPF) account<\/li>\n
  • Amount in Post Office Monthly Income Scheme (PO MIS)<\/li>\n
  • Amount in National Savings Certificate (NSC)<\/li>\n
  • Amount in Kisan Vikas Patra (KVP)<\/li>\n
  • Amount in any other debt schemes<\/li>\n
  • Amount receivable from some other person<\/li>\n<\/ul>\n

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    What should you <\/strong><\/strong>consider as a Liability?<\/strong><\/h2>\n
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    • Outstanding principle on home loan<\/li>\n
    • Outstanding car \/ two-wheeler loan<\/li>\n
    • Outstanding personal loan<\/li>\n
    • Any other loans outstanding<\/li>\n
    • Credit card payables (full amount, not just the minimum due!)<\/li>\n
    • Any bills payable<\/li>\n
    • Any other payables<\/li>\n<\/ul>\n

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      Your Net Worth<\/strong><\/h2>\n

      Now that you have listed all your Assets and Liabilities, just add up all the assets, and subtract all the liabilities from it. That is your Net Worth – something that you actually<\/em><\/strong> own!<\/p>\n

      {filelink=23}\u00a0Download the spreadsheet to find your Net Worth<\/p>\n

      You should find your Net Worth once every six months, so that you know what you own, and which direction you are going.<\/p>\n

      Needless to say, the higher the Net Worth, the wealthier you are!<\/p>\n","protected":false},"excerpt":{"rendered":"

        This article talks about the importance of finding your net worth, and explains how it should be calculated.<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[7],"tags":[29],"_links":{"self":[{"href":"http:\/\/www.raagvamdatt.com\/wp-json\/wp\/v2\/posts\/103"}],"collection":[{"href":"http:\/\/www.raagvamdatt.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/www.raagvamdatt.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/www.raagvamdatt.com\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/www.raagvamdatt.com\/wp-json\/wp\/v2\/comments?post=103"}],"version-history":[{"count":0,"href":"http:\/\/www.raagvamdatt.com\/wp-json\/wp\/v2\/posts\/103\/revisions"}],"wp:attachment":[{"href":"http:\/\/www.raagvamdatt.com\/wp-json\/wp\/v2\/media?parent=103"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/www.raagvamdatt.com\/wp-json\/wp\/v2\/categories?post=103"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/www.raagvamdatt.com\/wp-json\/wp\/v2\/tags?post=103"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}