Understanding your full financial profile is critical to making smart decisions for your financial future. A good way to get a bird’s eye view of your finances is to calculate your total net worth. By compiling a complete list of your financial assets, debts, and liabilities, you can more easily prioritize spending and make informed financial decisions. At first glance, calculating your net worth may seem complicated, but it only takes a bit of math.
What is Net Worth?
Net worth is often associated with the rich and powerful, but everyone has one and can benefit from knowing what it is. Net worth is the total value of all your assets minus the total value of all your liabilities. In short, your net worth is the money you have minus the money you owe.
How to Calculate Net Worth
The first step to calculating your net worth is calculating your assets. Your current assets are things you can exchange for money within one year of ownership, including cash (as well as anything in your checking, savings, and retirement accounts), inventory, prepaid expenses, and more. Your long-term assets are things you plan to keep for over a year before selling, including property, cars, etc. The sum of both these types of assets equals your total assets.
Next, you need to find liabilities. Like assets, you may have both short and long-term liabilities. Short-term liabilities include any debts due within a year, such as rent, payroll expenses, etc. Your long-term liabilities span over a year and include things like auto loans, student loans, debentures, and credit card debt. Add all your liabilities together to determine your total liabilities.
Finally, you can determine your net worth by subtracting your total liabilities from your total assets. A comprehensive understanding of your net worth can help you make sound financial decisions moving forward.
Manage Your Liabilities with Gravity Lending
Gravity Lending can help you manage your auto liabilities. We make the car financing process simple—from guaranteed asset protection, depreciation protection, and more! We can help you refinance your auto loan when the time is right. Contact us today to see how we can help you manage your auto finances.