You are sitting at home wondering what to do next. Maybe you’re worried about your finances right now or you worry about what the future holds.
Before you do anything, you should take the time to figure out your net worth.
Yes, this figure is important because it gives you a bird’s eye look at where you stand financially and will give you the motivation or push to make changes.
How to Calculate Your Net Worth
Don’t worry, you don’t have to take an accounting class to learn how to figure out your net worth; it’s a simple calculation:
Assets – Liabilities = Net Worth
In other words, how much more are your assets worth than what you owe? You may think you know the answer off the top of your head, but you may be surprised.
Trust us and take the time to total up your assets first. This includes things like:
- The money in your checking and savings accounts
- The money in stocks (if you have any), bonds, mutual funds, or other investments
- The equity in your home (the value of your home beyond your mortgage balance)
- The value of any cars you own (without a car payment)
- The value of any other large assets you own (other homes, vacation property, land, etc.)
Now, total up your liabilities. This part may not be as fun, but it’s necessary. Here’s a list to get you started:
- Mortgage
- Car payment
- Credit card bills
- Personal loan payments
- Student loan payments
- Tax liabilities
The difference between these two totals is your net worth. Is it the number you anticipated? If not, is it higher or lower?
Changing Your Net Worth
Now that you know your number, it’s time to put other strategies into action. What did you discover by your number? Are you further in debt than you thought? Do you have fewer assets than you thought or maybe they are worth less than you thought?
If you are in a different boat than you imagined, it’s time to make changes. Here are a few tips:
- Consolidate your debt – If you’re in over your head in credit card debt, consolidate your debt into your mortgage. Pay the right amount monthly and you’ll get yourself out of debt much faster than you thought.
- Negotiate your bills – Contact your creditors and negotiate your interest rates or payment plans. Find a way to make the bills more affordable not monthly, but overall so that you can get out of debt faster and increase your net worth.
- Change your investments – Are your investments sucking your net worth dry? It may be time to rethink your strategies and choose safer investments.
Knowing your net worth is empowering even if it seems scary. It lets you know where you need to make changes and honestly, now is the best time to start. Prepare yourself for anything that may come your way during this time in quarantine.