In last weeks posting, i had mentioned that there are two key aspects to look for, before venturing out. First, among those, was calculating your current net worth. Lets look into the details of the same.
Net worth is what’s left after subtracting your current liabilities from your assets.
Following categories fall under Assets
- Cash equivalents
- Amount in your bank accounts (including checking, saving & money market)
- Fixed deposits
- Investments in certificates like NSC, KVP etc.
- Cash value of your life insurance
- Investments
- Stocks
- Bonds
- Mutual funds
- Other investments
- Retirement funds
- Provident fund
- Super annuation
- Gratuity
- PPF and other retirement funds
- Personal assets
- Primary residence value
- Other residences
- Antiques / collectibles
- Vehicles
- Home furnishings
- Jewelry
- Others assets
Add all the above to derive your total assets.
Following categories fall under liabilities
- Loans
- Home loan
- Personal loan
- Student loan
- Auto loan
- Investment loans
- Loan against your PFs
- Any other loans
- Projected income tax liability
- Child support cost
- Other liabilities
Add all the above liability amounts to derive your total liability amount.
A word of caution: Be truthful to yourself when documenting the amount. By assessing your true net worth, you can figure out where you stand and can take control of the situation.
For some of the list items like residence value, you can assume the current value by finding out the real estate value in your area.
Your net worth = Total asset value minus the total liability amount.
If this value is positive or equal, then you are in good state of affairs. If you are in red, then i suggest you take up the financial matters in your hand as quickly as possible.
In next blog posting, we would look into the cash flow aspect of your financial standing.
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