Your net worth is good indicator of your financial position. It is the value that you would use to keep track of your finances when you are interested in building wealth.
This value can be calculated through a simple formula: total assets minus total liabilities.
However, before you start calculating what your net worth is, you will need to have an understanding of what classifies as an asset or a liability. Here is a quick overview.
Assets vs. Liabilities
An asset is something that you own and could be liquidated.
Here are some examples (but not limited to) of what your assets could be:
- The money in your bank accounts: checking, savings, tax free savings account etc.
- Paper assets: mutual funds, bonds and stocks.
- The market value of your real estate or vehicles
- Other savings: RRSP and RESP
- Pension plan and benefits
- Businesses that you own
A liability, on the other hand, is any outstanding debt you may have. These include:
- Student loans
- Vehicle loans
- Credit card debt
- Any other loans
To calculate your net worth, you will first need to add up all your assets and liabilities. Once you have done that, take your total liabilities and subtract it from your total assets.
Check out my personal net worth calculator and use it as a guide.
Follow my net worth updates
One of my plans for Million Endeavour is to document my financial journey through net worth updates. For those interested in my progress towards financial freedom, I will be providing a regular update of my net worth on this blog.
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