Everyone keeps telling everyone that their value comes from within until money comes along and then your value is related to your net worth. “Net worth” You might have heard this term before especially when the big bucks are mentioned. Whether it’s Bill Gates, Sawiris, or you, everyone has a net worth, but some more so than others.
What is Net Worth?
Your net worth is basically the value of every type of asset you own minus the liability or debt. Is it important? Should we really be tied down to our financial gains or lack thereof? Well, net worth says a lot about your financial health. It also puts all of your financial goals into perspective.
Before you jump into figuring out your net worth, you should know what things are considered assets in the first place. And no, the iMac is not an asset despite what the Apple cult says.
· Cash, obviously, on hand or in banks.
· Real estate (investments or owned).
· Lands or any natural resources.
Do the math
Mathematics is the average man’s enemy, but we gotta face it sometimes. To figure out your net worth all you have to do is subtract your debt from your assets. The only challenging part of it is that you have to gather all this info. which may take a lot of time or maybe not so much time depending on your wealth status.
So, let’s say that Ahmed has a house (EGP 900,000], a car [EGP 300,000], and a summer house [EGP 1.5 million], then your total assets would be EGP 2.7 million. That’s not your net worth, though. If we look deeper, we’ll see that Ahmed also has remaining debt for the summer house worth EGP 200,000 and loans worth EGP 400,000. So, Ahmed’s total net worth would be:
2,700,000 – (200,000 + 400,00) = EGP 2.1 million.
By figuring out your net worth, you can understand and improve your financial status. You can see whether the decisions and actions you've made in the past have a positive or negative impact on your financial health.