Net Worth
Net worth is how much money you have accumulated over time. You may think that net worth is just about your bank account balance, but it's not. It's everything you own, including real estate, cars, furniture, clothing, and anything else that has monetary value. In this blog we'll show you how to calculate your net worth and then make your net worth go further.
How to Calculate Your Net Worth
To figure out your net worth, you need to first determine what you own. Most people spend their days thinking about work, bills, and saving money. But did you know that you should really be thinking about how much money you're making? And how about your assets? Do you own any property, vehicles, or stocks? If you don't, you might want to start considering those things now. Once you've determined what you own, you can add it all together to get your total net worth.
Step 1: Add Up What You Own
The first thing you need to do is add up all of your assets. Start with your home, and add up all of your debts. Then, count your investments, retirement accounts, and anything else you own. Don't forget about your car, boat, or RV. When you're done adding up your assets, you'll have a number that represents your total net worth. If you're still confused, check out this guide to calculating your net worth.
Step 2: Determine How Much Money You Make
Now that you've figured out how much money you have, you can begin figuring out how much money you make. There are two ways to do this. First, you can use your paycheck stubs to determine how much money you earn each week. Second, you can take some time off work and keep track of your expenses. The second method is probably easier, so we'll focus on that here.
When you're taking time off work, you'll need to record everything you spend. That includes gas, food, entertainment, clothes, and everything else. After you've recorded your expenses, you'll be able to calculate exactly how much money you make per hour. Multiply that amount by 40 hours to get your annual income.
Step 3: Subtract Expenses From Income
Once you've calculated your annual income, subtract your expenses to find your net worth. If you live alone, you don't have to worry about paying rent or mortgage. So, you can subtract these costs from your income. However, if you're married or have kids, you'll have to consider childcare costs, utilities, and groceries.
If you're single, you can deduct your monthly rent from your income. If you're married, you can deduct both of your combined incomes. If you have children, you can deduct their child care costs from your income. Remember, though, that you can only deduct expenses that exceed 10% of your adjusted gross income (AGI).
Step 4: Increase Your Assets
After you've subtracted your expenses from your income, you can increase your assets. If you have a 401k plan at work, you can contribute to that. If you have a Roth IRA, you can contribute to it. If you have investments outside of 401ks and IRAs, you can increase them. Just remember that you can only increase your assets by $2,000 per year ($4,000 if you're 50 or older).
