As the year 2015 gradually comes to an end, now is a good time to review your personal finances and plan ahead for a better year 2016. In assessing my financial performance for the year, I usually calculate my net-worth. Net-worth is simply the difference between your assets and your liabilities. i.e what you own minus what your owe.
Net-worth measures the health of one’s finances because it is a good way of checking how much you are actually worth after paying off your debts.
Take time during the holiday to review your finances by carrying out this year end financial check as it is a proactive way to plan ahead for the new coming year.
Calculating one’s net-worth is very easy and shouldn’t take more than an hour/two unless you are a Dangote or an Otedola. So, grab your laptop or paper, pen and calculator and lets get to work.
Step 1: Make a list of all your assets. Assets here should include bank account balances, deposits accounts, bonds, stock value,mutual benefits, market value of your home and car. I usually don’t include physical asset except car and house. Add up the total value.
Step 2: Make a list of all your debt. Debts here should include balance of bank loans, credit card, salary advance, student loan, car loan, home loan and every other debt that you owe. Add up the total value.
Step 3: Subtract and view your result.
If your net-worth is negative, do not panic take a deep breath, relax and draw out strategies on how to increase your assets while reducing your debts. Also remember that although having a strong positive net-worth gives a sense of financial security, your self worth is really what matters in life.