You have probably never thought about it, but you need to know how much your property is valued. You can value your assets for net worth by taking all you own and factoring them in against debts you owe. Many things can factor into your net worth, including your residential properties, personal items and the value of investments, so you know your financial stability.
Know What Your Properties are Worth
For many people, the value of their home(s) is the highest they have. Whether you own one or multiple houses, you need to know their estimated value so you can include accurate information in your calculation. Easy-to-use online tools from companies like The Realty Medics can help with this. However, you should be aware that many things can affect the price of your real estate properties, such as market stability, crime rates and the state of the house. Knowing what your properties are worth is helpful if you want to sell them at some point.
Calculate Available Money
Your tangible assets include your residential properties and anything that can be physically held, such as cash. But intangible assets include your money in bank accounts. Available money should always be factored into your net worth since it can contribute largely. However, it’s possible you aren’t liquid and only have assets rather than monies available for many reasons. However, you can also include your income from any external sources such as wages, from a business or sales. Finally, add up everything you have from all accounts and stored away cash.
Include Retirement Savings
Further to money, you must include any retirement funds in your net worth. In the USA, for example, this means your 401K and pension stipends. In the UK, you should include your state pension money owed and money in a private or employer pension. Personal savings in savings accounts like IRAs and bank-managed savings accounts should also be included. And it is also helpful to be open and honest when doing this since you might be subject to tax payments from money held in these accounts.
Sum Up Investments
Another intangible asset you may have is an investment. Investments are trendy these days among millennials and younger people. The rise of cryptocurrencies like Bitcoin is an excellent example of a popular investment. But you may also hold stocks, bonds, and real estate investment trusts. When summing your net worth, you need to include the current value of your investment and not the original cost. However, you should be aware that when you take a net worth calculation, your investment value might be more or less depending on your returns.
Call Your Broker
Of course, if you aren’t sure about your investment portfolio worth, then give your brokers a call. Your investment brokers are required by law to provide you with a summary of your investment worth upon request, with all necessary details. Brokers are helpful because:
- They understand your personal finance.
- Can manage your money effectively.
- Work on your behalf to make money.
- Advise against bad decisions if you want to invest.
- Provide all paperwork related to your finances.
There are also different kinds of brokers, each specializing in a different area. For instance, you use a mortgage broker when applying for a house mortgage. A stockbroker when investing in trades. And insurance brokers if you want the best coverage possible for your available money.
Value Your Cars
One of the best assets you have in your cars, especially if they are vintage or considered exotic. These include collectibles like a Jaguar E-Type or supercars from manufacturers like Lamborghini and Ferrari. You can use your cars as collateral against loan repayments, but they are essential to include in your net worth. When valuing your net worth, you need to use your car’s current value and not the price you paid initially. It’s also helpful to get expert valuation rather than guessing since you can be wrong by including sentimental value.
Take Personal Inventory
In addition to properties, money and cars, personal items should also be included in your net worth valuation. Luxury items like works of art, sculpture and heirlooms are a great place to start. But you also need to think smaller. Personal stuff like watches, jewelry and even entertainment systems such as game consoles and TVs should also make the list. Essentially you want to include everything of value, no matter how insignificant you consider the item. And as always, the item’s current value is the primary figure here and not what you paid.
Deduct Your Debts
The final part of calculating your net worth is deducting your liabilities. This just refers to debts you owe. However, it doesn’t only mean debts from things like loans. It includes mortgage payments, deferred income, tax owed, expenses and insurance. Similarly, you should add up all expenditures for the year. Then you simply subtract your liability sum from the sum of your assets. Therefore, you have your estimated net worth. Calculating your net worth can be more challenging than you think, so financial experts and accountants can help.
Don’t Worry About Your Business
It is worth mentioning that the value of your business can be factored into your net worth, but they are considered separate entities. And neither will affect the other. So, for example, if your personal net worth reaches almost zero, the value of your business will remain what it is based on its own assets. And vice versa. This is because, just like your personal net worth, your business’s net worth is based on the sum of its tangible and intangible assets minus debts. However, a business net can be linked to personal net worth if you control assets and debts.
Summary
Knowing your net worth is essential for records, but it’s also helpful when securing loans and other financial assets. Tangible assets like personal property, cars and cash money are included. You should also list intangible assets such as savings, pensions, and investment portfolios. However, your business largely remains a separate entity with its own net value.