Posted by: saveafewbucks | August 19, 2010

What are you worth?

The answer to this question relates solely to net worth and has no bearing on actual feelings of self-worth. We are all priceless in our own way… You may proceed to barf now. 🙂

A Simple Calculation

On another blog, my brother once posted:

“I’m 31. I’m a guy. I live in on the West Coast (Vancouver). I’m a poet. I don’t know a thing about money. How do I calculate my net worth?!”

Months later, here is my response:

Net Worth = Assets – Liabilities

  • An asset is something you own such as cash, stocks, condo, car, etc.
  • A liability is a financial obligation such as a balance on your credit card, line of credit, car loan, mortgage, etc.
  • Assets should be valued the cash amount you would expect to receive if you sold it (i.e. the car you paid $15,000 for 4 years ago you may be able to sell for $5,000 now. Hence the value would be $5,000)
  • Liabilities should be valued at the amount it would be settled at (i.e. the balance, usually the principle amount plus any additional interest which has been charged to the account and not yet paid)

Easy to Say and Easy to Do?

Despite knowing how to do this simple calculation, I must admit that I don’t personally calculate my net worth each month. I SHOULD do it and have TRIED in the past. But inevitably I manage to fall behind along the way. I doubt time requirements or mental effort have much to do with my failure to keep up. Likely more a fear of seeing little or negative progression.

Are you afraid of your net worth?

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Responses

  1. yes. i probably am.


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