Just like a doctor would check your temperature among other things to check your physical health, your can measure your financial health by calculating your net worth.
Your Net worth, is also an easy way to detect whether a longer-term problem may be emerging, financial analysts say. Your can calculate your net worth by simply subtracting what you owe (your liabilities) from what you own (your assets).
Your net worth can be positive or negative. A positive condition means that, for the time being, your finance health is good. A negative condition is a bad sign.
How good depends on how much above zero, relative to your ongoing expenses, it is. Depending on how negative your net worth is, it could mean that you are deep in debt and near bankruptcy, or simply going through a difficult financial patch which will soon be over.
To figure your net worth, begin by listing together all of your liquid assets. A liquid asset is defined as anything that can quickly be exchanged for cash like savings and money market accounts, the cash in your wallet, the change on your night stand and the value of life insurance policies.
Next, make a list of anything you own, that can be sold with a fair market value and not the price when you bought due to depreciation. These two will make up your assets. For liabilities, make a list of every debt you owe, either from banks or financial institutions as well as from individuals.
It is important to note that increasing your income is no good if you do not reduce your liabilities. Even if your assets are not growing, your net worth will improve if you are paying your debts.
Your net worth represents your financial health at a certain point in time. Your net worth is important because before you can put together a budget targeted towards achieving certain goals, you have to first know where you stand financially at the current time.
Also, it is crucial to check your net worth regularly to identify underlining patterns, which may help you discover some habits that may be affecting negatively (or positively) your progress towards your financial goals.
So, today, try to find our your net worth.