When you see the List of Forbes Richest Man in the World, how do you think their wealth was measured?
Number of houses and properties?
Number of luxury cars?
Number of Businesses?
Number of rich friends?
Number of countries they have been to?
Amount of Salary?
Sure, these are the things we measure often in what we call, “Social Media Currency.” But these are not the true measure of wealth.
What Forbes used as a measure of Wealth, is the “NET WORTH.”
You have been hearing about Net worth and SALN (Statement of Assets and Liabilities) for politicians all the time these days, especially pre-election time.
But you don’t know your own NET WORTH, am I right? I am sure 90% of you reading this article are nodding their head.
For you, NET WORTH COMPUTATION is only for the rich and famous. You are WRONG.
From Investopedia:
Net Worth is defined as – Net worth is the amount by which ASSETS exceed LIABILITIES. Net worth is a concept applicable to individuals and businesses as a key measure of how much an entity is worth.
Let us simply put it this way,
“It is your Assets (how much you OWN) less Liabilities (how much you OWE others).”
People in other countries are not so innocent with their own net worth either, since they are required to file it every year in their respective countries. It is their way of knowing if they have to file for bankruptcy or not.
In the Philippines, Filipinos just see it as something that the rich do or politicians and government employees are required to file every year.
But do you know that knowing your “Net Worth” is so important especially if you want to get rich? Along with knowing how much you earn and spend, it is one of the most important step towards financial freedom.
If you don’t want to get rich, then don’t mind computing for your net worth, and don’t even finish reading this article.
But, if you want to become rich every month and every year, you have to know your NET WORTH. Period.
A consistent Increase = Good Financial Health
A consistent Decrease = Worsening Financial Health
It is not enough to get your Net worth once every 5 years. It has to be done consistently. The best to do it is every month or at the very least, once a year.
No matter how much your Net Worth will going to be, you have to compute it. It could be negative at first but the first goal is KNOWING how much.
Second goal is to make it to the positive side as time progressed.
HOW TO INTERPRET YOUR NET WORTH:
- It tells you where you are in your financial journey
- How sick you are financially
- Are you getting better or are you getting worse?
Now it’s time to know your own net worth.
Let me give you a tool for that.
download-free-net-worth-calculator
Download this free Net worth Calculator. It’s my Christmas gift to all my MyFinanceMD subscribers. Don’t’ forget to do it every month. And see for yourself a massive improvement in the way you see journey towards your financial goals.
Helping you reach your goals. Merry Christmas!
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Hi Ms. Pinky,
For the liabilities of a mortgaged house or car, should i include the interest or the remaining balance without interest only?
Thanks 🙂
Hi Vanessa, include the interest, since it’s part of your liabilities. 🙂