Simply put, net worth is what you have left with monetary value, after deducting any obligations you may have. Things with monetary value, called assets, include cash and other items that you can convert to cash. This can include "tangible" assets such as loans you gave and properties, as well as "intangible" assets such as trademarks, patents, or rights that is legally yours. Obligations, also called liabilities, are simply what you owe somebody, such as a bank loan.
You get your net worth by listing down and assigning an amount to your assets and subtracting from it the amount you assigned as your liabilities. Some items are pretty much straightforward: cash on hand and in bank is simply that. However, you may need to do some estimates to determine how much is the value of the car you own or the house and lot that you have. Liabilities are usually simple to find out as well, as it is usually billed on you.
Having a high net worth is of course a good thing, but what is a "high" amount is always relative to the lifestyle that you live. If your disposable income, as discussed earlier, is constantly on the negative (because you are spending more than what you are earning), then you can expect to see a decline in your net worth as you take on more liabilities or be forced to sell some of your assets. How fast the decline is a matter of how much larger your expenses are compared to your income.
One tool that can help out in knowing and understanding your networth is NetworthIQ. It's a site that provides you with a template or a sample of the items that you may own or owe, describe what these items or accounts mean, and provide some level of automation for you and a place to keep a record of your net worth month after month. NetworthIQ also goes further than simply being a site to record your assets and liabilities by providing features such as the chance to post financial questions you may have to the site's members, give and receive tips, and even record your financial journey. It will even allow you to compare your net worth against others once you decide to make it public, although I am not particularly sure what is the value of that. But making one's net worth public can be useful for some individuals such as financial planners and bloggers that may have a need to "prove" something.
I've signed up with the site, and although one can have some apprehension as to security, it doesn't seem much of a concern for me. The information they require at signup is quite limited. Utilizing the template does not require you to provide sensitive information, although you are pretty much limited as to the level of analysis you can make. Keeping your net worth private is the default for the site. What I find as potential value here is the community that can grow and assist you in your financial journey. You may want to try it out yourself. (Note: I am not related to nor gain income from NetworthIQ).
2 comments:
wow. i too would like to know my net iq.
thanks for sharing.
credit card terminals
nice to see a post as old as this was able to help you :)
Post a Comment