Monday, October 19, 2009

How to Calculate Your Networth

What is Networth?

In businesses, networth or book value of a company is obtained by adding up all the company's assets and subtracting it by the total liabilities. This is known as the networth of the company.

The same can be done for individuals to calculate their networth.

How to Calculate?

To calculate your networth, simply add up all your assets and subtract them by all your liabilites or debt as we commonly call it.

Why is this number important?

Tracking this number is a good way to see that you are building your wealth and increasing your assets. A person's networth should be increasing over time as their income increases.

My Personal Experience.

10 years ago when I was just 18 years old, my networth was only slightly over $1000. That was the total amount of money I had in my bank account. I had no other assets and no other liabilities.

During the 10 years, I have seen my bank account drop close to $0. After experiencing what it felt like to be "poor", I decided that I should never let that happen to me again.

Overtime, I begin to acquire assets like stocks. I also took on more liabilities as I had to purchase a house for my family. All in all, I roughly estimate my family's networth to be slightly above $500,000.

Observations about High Networth Individuals

There are certainly some common denominators when it comes to people of high networth. I think you will find that the most important thing about them is that they are FINANCIALLY SAVVY. In fact, Singapore has one of the highest concentrations of millionaires in the world and this is expected to rise.

They do know about their investments and they do know how to manage their money.

I would like to think that it is the financial education that this people get that helps them to grow their money.

But wait a minute! No school ever taught us financial education right?

You are correct!

Financial education is largely taught at home. Nowadays, I think financial education is obtained through reading of books and surfing of the internet. It is possible to become financially savvy simply by reading more from the internet and learning from the experiences of those who have walked the path.

Read Related Articles:
1. Conversation With A Millionaire
2. Singapore's 40 Richest
3. Are You Wealthy?
4. 3 Key Lessons from Rich Dad, Poor Dad
5. A Millionaire By Thirty

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