#365 Days Of Financial Capability – Day 3
Do you know your net worth? If you don’t, you should.
Your net worth is perhaps the most important metric for tracking progress towards financial independence.
Knowing your net worth important because it provides a marker on your starting point from which you can plot the best direction towards your financial goals and also measure your progress.
Also, calculating your net worth would allow you to understand the components of your assets & liabilities (i.e. how are your assets split).
To calculate your net worth, you need to subtract your liabilities (what you owe) from your assets (what you own).
Here’s the formula:
Assets – Liabilities = Net Worth
How to do this:
- On an excel sheet and list all your assets (property, investments etc.) and sum up their values.
- On an excel sheet and list all your liabilities (loans.) and sum up their values.
- Deduct the value of (2) from (1) and you get your net worth.
ps: Someone said you should also deduct money you owe people that you don’t yet know you owe them a.k.a black tax.
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