Net Worth: Why It's Important For You to Know & How to Easily Calculate It | Sabrina Ana Maria | Skillshare

Net Worth: Why It's Important For You to Know & How to Easily Calculate It

Sabrina Ana Maria, Your Personal Finance Motivator!

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6 Lessons (11m)
    • 1. Intro

      2:51
    • 2. Assets

      2:04
    • 3. Liabilities

      1:08
    • 4. Calculate

      2:09
    • 5. Conclusion

      2:22
    • 6. Project

      0:45

About This Class

In this course, I'm discussing why net worth is so important and we'll go through how to calculate it. Hope this helps!

Transcripts

1. Intro: Hi, everyone. Welcome to my skill share page about how to calculate your network. If you're a returning student, then thank you so much for watching other video. If you are not overturning suit and your new then feel British, I get any of my other personal finance content. I'm a certified a financial education instructor, so I just love teaching financial literacy and just focusing on the basics of personal finance. And captain, your network is a great place to start. If you haven't already watched my top habits that you need to adopt for financial independence feel free to watch that course of otherwise. Let's just get into now before we calculate your network. Let's talk about why your net worth is even important in particular. And I think the most important factor is that used to focus on your progress rather than perfection with personal finance, the everyone has their struggles. Everyone has certain circumstances that they're put in whether it's, you know, student debt or medical doctorates, or an issue or losing your job or having to take care of the rest of your family or, you know, a significant other because they lost their job Everyone has a different circumstance and not everyone. We'll have the same assets as another person, and not everyone will have the same debt as another person. And you should never really be comparing yourself to someone next year because everyone has a different situation in life, and we all know that. But if you're going to compare, if you feel like you need to compare your own progress against someone else's, I would be calculating your net worth, because think about it this way. You can have someone that has $500,000 in assets, you know, maybe to have an apartment or there's plenty of money in the bank or something like that, and you only have maybe $1000 in assets. That's totally fine. Everyone has a different scenario, But rather than comparing who's Richard, who has more money, you're taking into account, you know, debt, which is a really huge thing. Maybe you just paid off your mortgage so you don't really have that much money in the bank . But, hey, you have no liabilities and then you're working up your assets from that point on and you're building up your network personally. That would be way better of a situation that someone that has all this money but isn't tons of debt. So the reason why we need to calculate this is because one it gives you a good idea of your financial picture rather than just focusing on, you know, maybe the negatives of having a lot of debt. And it helps you focus on your progress rather than the perfection and the concept of having so much money and assets and so much money in the bank or through a home or a car, anything. I thought you were focusing on you. As long as you are improving this number, you will be on your way to financial independence, and I promise you that this is not a difficult thing to calculate, but it's definitely very important. 2. Assets: now Step one in calculating your net worth. If you haven't already known the calculation, we're gonna be calculating your assets first. So that is any cash you have on hand in the bank in different accounts. It also accounts for your house, your 41 K Any investment accounts, Any cars that you own, anything that is owned, money that you could, you know, sell up for cash has liquidity. In a sense that, you know, liquidity just essentially means that if you haven't asset like a car, a house, it can be sold and made liquid meaning into cash, so that could be made into cash. Shore, especially his homes and cars, are something that are Eastleigh, you know, purchased and sold. If you have a necklace or something that's really expensive, is that really considered an asset? Maybe you could sell it, but it's one of those things where you have to go find a buyer and discuss a price. Meanwhile, you know homes and cars are a little bit easier to sell, so if you have something they could easily converted to cash, not easily. But it's definite that you can convert it to cash like a home or car. Then you can consider an asset, even if you have a loan or a mortgage on it. And I will explain that in the next step. Now you might be thinking, Yes, I could take a piece of jewelry or watch and go Teoh, you know, go to like a pawn shop or something or, you know, some place that buys gold and sell it. That's 100% true. But there so many things in your home, probably that you can consider. And I said, because you could sell it at a pawn shop or something like that when it's really hard to add that up. And what if you lose it? You know, we're focusing on, you know, actual assets that are large, larger things than just something in your cover. Murder in your drawer. So focus on you know your accounts, the cash before okay, best accounts and essentially just ah, home or a vehicle 3. Liabilities: The next up we're going to go through is your liabilities. So those are all things that make us furious. So any sort of debt that you have, whether that's the student loans that you can't get rid of because they're just ridiculous or credit card debt that you have a crude. This also accounts for a mortgage. Now I know that there have probably been some discussions over isn't really something that you own if you have a mortgage on it or if you have a loan on it. And I have researched this extensively. I love looking at personal finance videos. And if you follow one big, happy life on YouTube, she likes to consider Ah, home an asset. Even if there's a mortgage on it, they'll just account for it, both of them in each, you know, in Asset Section and Reliability section. Dave Ramsey also would consider this the same thing, And Dave Ramsey is widely known, you know, personal finance expert. He considers in an asset something that's worth selling to help attack your debt, regardless of if you have a loan or something on the car. So definitely consider, you know the cars in your assets, but also in your liabilities. If you have anything to pay 4. Calculate: now the last step of technology network is so bladers. Do you calculate it? So try to take all of your assets, get a number on that and get it on number on all of your liabilities and you're just going to subtract your liabilities from your assets. So hopefully this is a positive number. But if it is negative, do not stress what so ever The whole point of view calculating it is to give you an idea of where you're at. This should not be something that's discouraging. This should be something actually encouraging, saying, Hey, I finally know where my finance our finances, right? I finally know what position I'm in and how I need to move forward. If your number is negative, that means that obviously your liabilities air more than your assets. But it doesn't necessarily mean you need to get discouraged over your debt and think that it's gonna rule you. You can also increase your assets and improve that net worth number. So keep that in mind, and also I like to calculate my net worth, but I also calculate a slight variation of my net worth where I calculate all of my debt that is not a student loan and calculate net worth if student loans didn't exist. So graduate, this isn't the correct calculation of a net worth, but I kind of like putting that number on the side because the debt that is not my student debt is a little bit more actual. It's my credit cards that I can actively, you know, attack a little bit more cause they're smaller than the student debt that I have constant payments going out, too. So I like looking at my net worth for both. Yes, technically. And I will. 100% say you're not worth its assets minus liabilities, but sometimes the number can get a little bit discouraging. And I, like Teoh, have both numbers there to put in perspective like, Hey, yes, your net worth is negative, but it probably will be negative for a while because your student loans are such a huge took of it. And I like to look at another number saying Hey, with all this credit card debt or any other small little loads, you have attack that because that is only X amount and you could increase your net worth a lot quicker so don't get discouraged. You know, you could have that action number if you like. Of course. Start with cancelling your actual net worth and go from there. 5. Conclusion: So that is it for this course. Like I mentioned, the most important thing to stress is that now that you have calculated this number, you have a good sense of where you're at financially and you could move towards financial independence and financial stability because you have a benchmark. And once you have that benchmark, you can progress on that benchmark all you have to know. And what makes me feel better when I can hit my now Worth, I have a Google sheet spreadsheet that I can't get my network, that I always track all of my stuff. And yes, I do put the numbers of my net worth. And you know what date it is, what my net worth with today what my net worth is. But I also like putting a graph right next with just to give myself the satisfaction to see a Trent man. Great did. I am negative, pretty substantially because I have, you know, significant amount of student debt. But as long as I see that graph going up, I am happy girl. I know that I am trying my artist. I am working hard on my goals and I'm actually moving forward with something as opposed to keeping that level flat. So try to actually have a graph set up. You know, wherever you're tracking your net worth, it is, could be on paper. But I like visually seeing my graph go up. Even if it's in the negatives, it's going closer zero and then going closer to, you know, above zero. So keep that in mind. And as I mentioned, I have some other courses on this page if you'd like to check it out. One of them is some important habits that you should be adopting to become financially independent. Another one is how to quickly and easily invest. I know investments are terrifying, and I'm still trying to figure out, you know, the higher levels right now. But what's important with investments is that you start early so and easily because obviously, if we're not 100% knowing what we're doing, the easiest way to start, you know, is the best way to start. So I have a video on that as well, and then the last course I have is how to budget. So if you haven't figured out how to budget, you know, to help you're not worth get better. I have that course on there as well. Now, if you have any questions about anything, feel free to contact me. I would love to help you on your journey. Financial literacy, if you do it, need anything. And your journey to financial freedom loved help. But that as well. So feel free to contact me like I mentioned, If you have any course ideas that you think would be beneficial, feel free to let me know. All I want to do is make things easier for you. Because I know personal finance isn't something that is, you know, widely taught in schools or anywhere else. So feel free to let me know that. 6. Project: And as for the project, this video, I mean, it's pretty self explanatory. I need you to calculate your net worth. Get a piece paper writing all your assets by general your liabilities. Calculate that number and then to move a step forward, just make sure you're tracking that every month. You contracted lesson a month. I tried it. Every time I get paid, just Teoh, allocate all my money where I want to allocate it and just to show progress. You can kind of this as many times as you need If you didn't help tracking your assets and liabilities. If you have a good amount of accounts, mint dot com is a great thing to use. So that's it for your project. If you'd like to submit them, submit them. But obviously that is personal information. We're talking about personal finance, so feel free not to do that. But if you needed something to do, it would be too calculating at work. And that's it. So I will see you as in the night. Of course. Have a great day