Computing Your Net Worth

I had some free time today so I decided to compute my net worth. Having a positive net worth is one of my goals this year so I thought, this was the perfect time to calculate it.
To answer James with his question regarding net worth, let me quote Pinyo’s “Basic Formula of Wealth” :
One of my favorite subjects that I talk a lot about on this blog, is the subject of wealth. As you know, I share my net worth monthly. Although there are many beliefs and philosophies on how wealth could be accumulated, the mathematical nature of wealth is all the same: Wealth (Net Worth) = Assets – Liabilities.

Here?s a little graphic to help us visualize this concept:


Net Worth Assets Liabilities

So what are some basic facts that we could derive from this?

1. If I want to increase my net worth, all I have to do is increase my assets and reduce my liabilities

2. If my income is greater than expenses, then I could use the surplus to:

* pay down my debts, thus reducing my liabilities
* save and invest, thus increasing my assets
* the net effect is increased wealth, or net worth
3. If my income is less than expenses, then the deficit:
* could force me to liquidate my assets to cover the excess expenses, thus reducing my assets
* could force me to accumulate more debt, thus increasing my liabilities
* the net effect is decreased wealth, or net worth

To have a positive net worth means to have more assets than liabilities. So how did I fare? Surprisingly, I do have a positive net worth. And in light with this, Goal #3 in my first post can already be marked as completed. But I’m not done yet. I have decided to update this goal and hopefully, a net worth of P250,000 can be achieved by the end of the year. I recently signed up with Net Worth IQ to help me keep track and share with you how I’ll be doing over the year.
So, what’s your net worth? Let me know and let’s share ideas, leave a comment below. Thanks!