Whenever people are asked how wealthy they are, the common answers come up by showing their assets, car, home, other properties, bank balance etc. But whether these are the true measure of someone’s worth is a big question. Most likely not! Then what is actual net worth and how to calculate is something to discuss.
Well! You might think “is it really essential to calculate your net worth?” “If yes then why?” To answer this first you need to know what is actually called tour net worth. In actual net worth is nothing but the tool that helps you to know your actual financial sound being. You must be clear of the fact that thing with which some liabilities are involved is not entirely your asset so long you get free from hat liability. For example if you buy a house having home loan, the house will not be considered as your asset so long you are paying the EMIs. Once you clear all you have borrowed then it is your asset.
Your net worth takes into accounts both your liabilities and assets and thus figures out your financial standing. In short the basic calculation of your net worth is (your assets-your liabilities).
Let us have a theoretical detailed discussion on the fact below.
Calculation of your net worth:
As said earlier calculation your net worth is just using a simple formula. But the calculation becomes tough when you mix up your liabilities with your assets. You must first differentiate them and then by setting the formula you will easily get to know your net worth.
What is counted as your assets?
Like we discussed earlier all your belongings on which we do not have any liability is counted as your asset. More precisely the market value of your properties is your actual asset. Let us discuss few examples. Suppose you own a house which’s market value are 30 lacks rupees so this is your asset. Apart from that I you have a share of stocks or if you invest in mutual funds or if you own a farm house or even if you have jewelries, the market value of all these will be counted as your asset. In addition there is another thing that adds to your asset that any amount of money someone owes you. Put together all these and find out your actual asset.
What is counted as your liability?
Now the question is which of your belongings are considered as your liability. Well this is a bit tricky to figure out. Your entire loaned amount like if you have any loan for yr home, car or may any personal loan. Other than that your total credit bill and outstanding payments also come under the account of your liabilities.
What actually net worth settles on?
Now it is no longer tough to figure out the net worth that actually determines your actual financial stand. The greater is your net worth, wealthier you are. So always try to maintain a good net worth to live a wealthy life.
About Author: Nisha is a business finance specialist providing financing advice and assistance to small and medium sized businesses. To get more information on the topic of Settlement Loan go visit http://www.fastloantoday.com.au/
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