Do you know what your net worth is, and do you know why you should care? If you are like most people, you don't really know what your net worth is. In fact, not too many people seem to have the time or the interest to know what their net worth is - how to calculate it and the benefit that comes with the knowledge.
So, if you don't know what your net worth is, now is the time to find out. Why? Because net worth is a very important indicator of your financial situation at the present point in time, and it is something you should be aware of when you're thinking about creating the life you desire. Since everyone's situations are different, you will need to ascertain how much money you must have each year to fund your lifestyle.
Having the big picture of your net worth allows you to gain insight into your financial health. It opens up awareness in every area of your life. Through looking at your current net worth, you can identify the serious red flags in your assets and liabilities.
Net worth is calculated by subtracting your liabilities from your assets. In simple terms, net worth is the difference between what you own and what you owe. Depending on your finances, the resulting figure can be positive or negative. A negative net worth — when you have more liabilities than assets, can be the wake-up call you need to make some serious financial adjustments. This provides a wake-up call that you are not on track. A negative net worth can clearly highlight where you may be over-leveraged, that you have more liabilities than assets you can sell to pay them off.
A positive net worth, on the other hand, — when you’ve more assets than liabilities — can be a confirmation that you’re doing well, and can help you plot out how much longer you need to reach your next financial target. This can give you encouragement that you are heading in the right direction.
When you see the big picture of your financial situation, you will have a greater awareness of where you stand financially. It can tell you a lot about your current financial health, and help you to plan for your financial future, with awareness. Net worth is probably the single most important measure of personal finance, which is why knowing your net worth is so important. It is a snapshot of where you are in life. If you don’t know where you are financially, it’s going to be tough to figure out what you need to be and do different to achieve your target.
Being on intimate terms withyour net worth statement, you can create more possibilities in your life with ease. Reviewing your net worthregularly over time can help you determine where you are, and what else is possible. So, why does it matter? It’s one way to tell if you’re really getting ahead. Knowing your net worth helps you keep your eyes on your money, make financial plans and track your progress. The most important thing with net worth is not how high it is, but rather which direction it’s headed.
When you know where you are and how you have created that, it is relatively simple to work out what it would take in financial terms to get where you want to be. By knowing where you stand financially, you will be more conscious of your financial activities, better prepared to make smart financial choices and more likely to create new and different possibilities for your short-term and long-term financial targets. Of course, everyone has different desires and requirements - and the more you are aware of your net worth, the more confident you'll be in determining your own path.