Most of us have heard the words ‘net worth’ and we know it has something to do with wealth. We have probably heard about the net worth of some celebrity or hot shot businessperson. Most people do not take time to think about their own net worth.
Some people think their net worth is what they own but it is a little more complicated than that. You have to consider what you owe before you have an accurate picture of your net worth. Take what you own, subtract from it what you owe and you have your net worth.
What we own (assets) has to be listed down and valued. Say you own a house. You have to give that house a value.
Assets might be:
- money in the bank
- market value of your home or any other real estate that you own
- market value of your business
- shares in companies
- sacco savings
- insurance policies (cash value)
Liabilities might be:
- student loans
- bank or sacco loans
- any balance on a credit card
- any other debts
The difference between the two is your net worth.
Don’t despair if your net worth is somewhere near zero, or even in the negative. That is just your starting point. Where you go from there is entirely up to you.
Create an action plan for paying off your debt and growing your assets. Every time you put money towards reducing your liabilities or towards saving or investments you are one step closer to where you want to be. We would love to hear from you, so call us or email us now.