There’s no better feeling than watching your savings accumulate. If you’re working towards paying off your debts, working out your net worth can be a great way to motivate yourself. You don’t need an accountant, and you could probably calculate it in the time it takes to go to the shops and back.
All you need to do is follow these steps:
- How much have I got? Step one is to add up the value of your assets. Your most valuable physical ones will likely be your house and your car, provided you own both of these. If you are a homeowner, your home will be a good place to start – if you don’t know how much it’s worth, have a look at the prices of similar homes in your area (or your street, if possible) on somewhere like Zoopla or RightMove. Be realistic here – as your most valuable asset, your home will make up the bulk of your net worth and valuing it too highly could make your net worth figure a bit optimistic!When factoring in the value of your car, it’s important to remember that unlike houses, cars depreciate in value month-on-month and year-on-year. So what you estimate the car’s value at now will likely have declined when you next come to work out your net worth. AutoTrader is a good place to find similar cars to yours and get an idea of its resale value.If you feel it’s worthwhile, you can also add in other physical assets – jewellery can be worth thinking about, although its true worth is often difficult to estimate without visiting a jeweller and getting a valuation. Either way, once you’ve added up your major physical assets, it’s time to include your actual cash. This includes the contents of your bank account and any savings, as well as any pension schemes or other types of investment you may have made, like shares in a company.
- How much do I owe? The next step is to add up your debts. If you’re a homeowner, what’s remaining on your mortgage will likely be the biggest one, but it’s important to make sure all the money you owe on your credit cards is tallied up too. It’s important to make sure you include the remaining balance on any personal loans, car loans, and student loans as well.
- Calculate the total Now just subtract the number you got in stage two from the number you got in stage one and that’s it: you’ve calculated your net worth.
Now that you Know Your Net Worth, What’s Next?
Now you should ensure you track your progress as you continue to save. If you repeat this process every month or so, it can be a pretty handy method of keeping a bird’s eye view on your finances. It can give you a boost when your net worth rises, but it’s also a good way of keeping aware of debts that need to be dealt with.
Don’t forget, it should get easier each month, as a number of your financial dealings will stay fairly consistent. The first time is always more difficult, but once you’ve got a handle on it, there’s no reason for this to be a drawn out process – and it can help you keep on top of your finances better in the long run.