Net Worth: How much is your true wealth? This is how you can calculate your net worth in just one minute..
In today's rapidly changing world, your financial health isn't measured solely by your monthly income or bank savings. If you truly want to understand your financial strength, you need to understand your net worth. This is the statistic that truly reflects your financial success.
Financial awareness in India has reached a new level. With mutual fund investments surpassing the massive ₹50 lakh crore mark and over 100 million ordinary investors active in the market, accurately assessing your net worth has become more important than ever. Simply put, net worth means that if you were to sell all your assets today and pay off all your debts, the remaining amount would be your net worth.
Net worth is your financial horoscope.
Calculating your net worth isn't rocket science; it's quite simple. You need to develop a clear picture of your financial situation. Let's understand how this math works with a simple example.
First, add up all your assets: Assets are anything you own that has a market value. This includes all your possessions, big or small.
Bank balance: ₹100,000
Fixed Deposit (FD): ₹100,000
Stock Market Investment (AMD): ₹100,000
Your house (current market value): ₹50,00,000
Your car (current market value): ₹10,00,000
Gold and silver jewelry: ₹200,000
Your total assets: ₹65 lakh
Now, list all your liabilities: Liabilities are all debts you have to repay today or in the future.
Home loan balance: ₹20,00,000
Car loan balance: ₹3,00,000
Credit card bill: ₹30,000
Your total liabilities: ₹23.3 lakh
Now use the formula: The simple formula for net worth is: Total assets ₹23.3 lakh = ₹41.7 lakh.
According to this calculation, your actual net worth is ₹41.7 lakh.
Why is it important to know your net worth?
An accurate measure of your progress: If your net worth is increasing year after year, it's a clear indication that your financial decisions, savings, and investments are on the right track. It acts like your personal balance sheet.
Your safety net in case of emergencies: A positive and growing net worth assures that you are better prepared to face unexpected challenges in life, such as a medical emergency or job loss.
Easy path to retirement: Net worth plays a crucial role in retirement planning. Financial experts believe that if you build a net worth of ₹1 to ₹2 crore by the age of 60, you can comfortably withdraw up to ₹20,000 each month (as per the 4% withdrawal rule), which will essentially serve as your pension.
Helps in getting a loan: When applying for a large loan, such as a home loan, banks consider your net worth in addition to your income. A strong net worth enhances your creditworthiness. For example, a person with a net worth of ₹50 lakh is significantly more likely to get a home loan of ₹25 lakh.
How to become a smart manager of your wealth?
It's not enough to calculate your net worth once and forget about it. Regular tracking is crucial. Experts recommend evaluating your net worth every six months. This is because the value of investments like the stock market, gold, and property fluctuates over time, causing your net worth to fluctuate. You can track your assets and liabilities by creating a simple Excel sheet.
Disclaimer: This content has been sourced and edited from TV9. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.
