“Net Worth” – a common term we usually come across on several social media platforms, business magazines and newspapers - “Know XYZ Celeb’s Net Worth!” But what exactly is net worth? Financial experts say net worth is the amount by which their assets exceed their outstanding liabilities.

However, computing net worth is not limited to celebrities or popular people. You can determine your net worth and determine your financial health. Interested to know more about your net worth? Read on!

First Things First… Why Should You Know Your Net Worth?

Here is a thing, when you estimate your net worth, you get an idea about what you have at your disposal. Listed below are some concrete reasons why you should determine your net worth -

• It is one the most precise representations of your wealth or financial positioning.
• It reveals problems that you never knew existed and enables you to confront the hard facts. Say, when you estimate your financial health a.k.a. net worth, you might realise the dream house is still down the long road as your current liabilities need to be handled first.
• Your net worth helps in putting things into perspective, i.e., you get an understanding of your assets and liabilities.
• Regularly reviewing your net worth makes it easier to track your financial health every now and then.

The Fun Part… Calculating Your Net Worth Like a Pro!

Before diving into the big calculation, it is important to understand that net worth is not your income. It is more than that. Here’s how to calculate your net worth like a Fortune 500 financial analyst.

• Step 1 - Add the assets valued at the current market prices. These assets include the existing market value of stocks, fixed deposits, bonds, vehicles, or property that you might own. Once you figure out the market value of these assets, add them up to know their worth.
• Step 2 - Add all your financial obligations including car or personal loans, credit card balances, and mortgages. The number you get comprises of your total liabilities.
• Step 3 - Once you compute the two figures, subtract the total asset value from the total liability amount. This is the amount you would be left with after paying off your debt.

Hacks to Increase Your Net Worth

As you keep lowering your debts and your belongings become more valuable, your overall financial worth will increase over the years, making your money situation better. Here are some suggestions to make your financial worth better:

• Use a mobile application to keep track of your financial worth often.
• Focus on paying off debts and think about merging loans or mortgages.
• Choose savings accounts that earn more interest than regular ones.
• Have a well-organised plan for investing that includes different types of things you own, based on how much risk you're comfortable with.
• Put any extra money like bonuses or raises into accounts for emergencies and investing.
• Seek advice from money experts to create a special plan for investing that fits you.

Looking at clear financial patterns in your net worth statements makes you face your financial situation directly. When you regularly check these statements, you can figure out where you are financially, and how to reach your goals. It can motivate you when you're making progress (like lowering debt and increasing savings) and show you the reality if you're not doing well.

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Written By - Tanvi Pathak