Are you building wealth or sinking into debt?

By Drum Digital
15 September 2014

You need a measuring stick, and that measuring stick is your net worth. Your net worth is the value of all of your assets minus the value of all your debt.

Keeping track of your financial journey is one of the most important ways to ensure a healthy financial future.

You need a measuring stick, and that measuring stick is your net worth. Your net worth is the value of all of your assets minus the value of all your debt.

YOUR NET WORTH (wealth) = YOUR ASSETS – YOUR DEBTS

Your net worth is a good way to evaluate your financial progress. It also represents your true wealth.

 The mistake we often make is to measure wealth by how much income we bring in. Yet, someone with a high income can have a low net worth (wealth) if they've amassed a lot of debt.

To calculate your net worth, you’ll need to calculate the value of all your major assets and determine the value of your:

  • Car and other recreational vehicles
  • Home and other real estate
  • Savings and cheque accounts
  • Mutual funds and other investment accounts
  • Other major investments (art, coin collections, antiques, etc.)

Calculate the value of all your debts/liabilities, determine how much you owe for your:

  • Car loans
  • Bond/s
  • Credit card debt
  • Student loans
  • Personal loans

Once you subtract your debts from your assets, you’ll have calculated your net worth. This will be the measuring stick you use to evaluate your financial progress.

Many people have a negative net worth, which means they owe more money than the value of stuff they own. Don't panic if that's the case with you.

Work towards ensuring your net worth increases over time.

Review your net worth periodically so that you can track your progress and make adjustments in your financial life as needed.

Your net worth will always help you determine if you’re actually building wealth or falling further into debt.

-BLACK AND MARRIED WITH KIDS

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