Have you ever wondered how much money you actually have? Not just what’s in your bank account, but everything – your portfolio, insurances, physical assets, but also all your debt on various cards. That number is called your net worth and it is probably the most important number you need to know on your financial journey. Because how will you know how far you need to go to achieve your goals, if you don’t know where you are coming from?
Why Your Net Worth Matters
Imagine you’re about to embark on the ultimate road trip. What’s the first thing you check? That’s right – you need to know where you are. Knowing your net worth or your financial status quo is like the blue dot on Google Maps; it tells you where you are so you can plan the most fabulous route to your financial destination.
A Simple Way to Calculate Your Net Worth
So what is the easiest way to figure out your starting point? All it takes is three simple steps:
1️⃣ Asset Hunt: List everything you own, Money Magnets! Your savings accounts, your investment portfolio, your pension annuity, the value of your home, your car, the gorgeous necklace your gran gave you – everything that you own and has a monetary resale value.
It might feel like a tedious task of sifting through all those papers and going online to find the price tags of your home or car, but did Indiana Jones ever complain about looking through old papyrus rolls to find the next clue? No! He was on a treasure hunt and so are you. Making this inventory is the first step to finding your holy grail.
You might come across documents you are not sure about, whether they are an asset or not, like your insurances. Maybe keep them on a separate list. If you have an income protection or disability insurance, then they are more like a safety net than an actual asset. It is fantastic to have them – wouldn’t want to go skydiving without a parachute – but you do not own anything and you only get payouts under certain circumstances. What you should list among your assets though is any debt that someone else owes you – provided you know that you will see that money again.
2️⃣ Liability List: Now, jot down everything you owe. Think of this as your “pay and slay” list – from credit cards to loans. No judgment here, just clarity!
This one should be a lot quicker than the first list. Just go to your bank(s) and check how much you owe for any home, personal or student loans and how much you have outstanding on your credit card. Then, go through your shop cards. Do you have any outstanding accounts with Ackermans, Woolworth or any other shop? And lastly, is there anyone – like a friend or family member – that you owe money to?
3️⃣ Net Worth Dance: Subtract your liabilities from your assets. Et voilà!
That’s your net worth, your current financial status quo. It’s like the score at halftime; it tells you how the game’s going, but not how it ends.
Be kind to yourself
For many of us Money Magnets, this might feel a bit like looking at your reflection in the morning – not always what you hoped for. But remember, this number isn’t about your worth as a person; it’s just a snapshot of this very moment to help you plan your next big move.
Big shout out to you, if your net worth is positive. You have been doing many things right and now you can grow from there. But what if your number is low or negative? Knowing your net worth is not about judgment; it’s about understanding.
So be kind to yourself. Your net worth is your starting point, not your final destination. Give yourself a high-five for having gotten this far! Now you know exactly where you stand and can plan your future with more certainty.
Easy Peasy Lemon Squeezy: Feeling lost on where to start? Jump into our FREE Mini-Course where we make tracking your finances as easy as daydreaming about your favourite holiday location! Sign up here and grab the tools to take control of your financial destiny.
Knowing Your Net Worth Could Save Your Life
It might feel scary or daunting to calculate your net worth because you are afraid of the outcome. You may feel like it’s better not to know and hope for the best. But hope is very dangerous. It leaves you unprepared for when things do go south. Your car breaks down unexpectedly or you suffer a panic attack out of nowhere and now your mind spirals deeper into a state of anxiety affecting your work. Big bills not covered by insurances or the inability to work are a nasty surprise, but we have all experience such a moment.
If you know how much money you actually have, you can plan for such eventualities by creating a safety fund and that gives you peace of mind. Not knowing your net worth always leaves you a constant limbo of hoping for the best and fearing the worst. This causes mental stress, which can lead to health problems that will then cause more stress and worries – a dangerous downward spiral.
Finding out that your net worth is negative might make you feel like you have failed. But that is a short-lived discomfort. Because now that you know where you stand, you can start working your way back to a positive number and creating that peace of mind that will let you sleep peacefully and is good for your mental and physical health, creating an upward spiral to your dreams.
What’s Next for You, Money Magnets?
Now that you know your starting point, let your financial dreams take flight:
- Ready to wave goodbye to debt?
- Saving for that dream vacation or a new business venture?
- Eager to start investing and watch your money grow like a garden?
Whatever your goals are, we’ve got the tools to help you get there.
Your Journey Starts NOW
Money Magnets, your status quo is your launch pad. Once you know it, you transition from worrying about money to ruling it!
And if you’re ready to dive deeper, check out our 9-week course that will have you set up in no time, or follow us on our social channels for tips, tools, and inspiration. Our mission is to empower you to understand your finances once and for all. Financial education that is easy to understand – together, we’ve got this!
