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Getting a good sense of your financial situation is more involved than just looking at your bank account and seeing how much is in your checking account: it is key to know your net-worth, a much more accurate representation of your financial health.
Financial experts recommend calculating net-worth every month so you know where you stand. Here’s how to do it:
List out your assets estimating the value of each and then add up that amount. Here’s what to include:
- The cash in your bank accounts
- The value of your investment accounts
- The value of your car (it’s key to factor in depreciation)
- The market value of your home
- Any business interests
- Personal property that would have value if sold including jewelry, art, furniture
- The cash value of any insurance policies
Then, you are going to want to make a similar list but this time of your liabilities. Here’s what to include:
- Your mortgage
- Car loans
- Credit card balances
- Student loans
One you have your two lists and two totals simply subtract your liabilities from your assets and voila that’s your net-worth. Consider this a first to knowing how well you are doing so you can go about reaching your financial goals.
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