How is Net Worth Calculated
Net worth is basically the value of all the things you own minus all the things you owe as debt . Net worth is calculated by subtracting your liabilities from the value of all your assets.
Net worth = Assets – Liabilities
Assets are all valuable things that you own like house , land , automobiles , stock holdings including your bank balances , cash and investments . If you own shares of a company then net value of those shares will also be accounted as asset .
Liabilities include everything you owe on your assets and all your debts. These include personal debts, bank loans , student loans , credit card balances and mortgage etc
In order to calculate net worth , first, a list of all your assets and total amount of liabilities is made . Net work is calculated by subtracting the total amount of liabilities from total amount of assets .
If value assets is more than liabilities then net worth is positive and similarly if liabilities are more than assets then your net worth is negative . To increase net worth assets are increased by savings , investments and spending less money and also by decreasing liabilities by paying off loans and personal debts .