Monitoring your net worth is important to determine your existing financial status and make better money-related decisions. You can use a net worth calculator to help you keep track of this number. A net worth calculator is an online tool used to calculate an individual’s total assets minus total liabilities, thereby giving the user their net worth.
You can find different net worth calculators online, each with its own unique set of features. But they all serve the same purpose – helping you track your net worth over time so that you can develop a sound strategy to manage your finances efficiently.
Here is how to track your net worth using the net worth calculator
The formula is:
Assets – liabilities = Net worth
1. List down all your assets and liabilities
Make a list of your assets and liabilities in detail. Your assets are everything you own that has value. This includes your home, savings account, mutual fund investments, cash, gold, retirement plans, stocks, property, and other assets. Your liabilities are everything you owe. This includes your outstanding loans, bills or payments, income tax owed, plus any other debt.
2. Enter the details into the net worth calculator
Now, enter the values of your assets and liabilities, after which the net worth calculator will do the maths for you and show your current financial standing. This number will be either positive or negative, depending on whether you have more assets than liabilities. A positive number means you have more assets than debts which indicates a strong financial position. A negative number means you owe more than you own, which implies the inability to service your debts.
To get an accurate estimate of your net worth, always include the full market value of your home, gold or jewellery, equity mutual fund investments, and other assets you own. And be sure to include all debts, including the loans you have borrowed from friends or family.
Why do financial advisors recommend using a net worth calculator?
- A net worth calculator gives you an instant and accurate assessment of your current financial status. With just a few clicks, you can get a clear picture of your assets and debts, allowing you to evaluate where you are with your financial goals.
- Even if your net worth fluctuates over time, you can use this online tool to track the changes and view your current financial status.
- Using a net worth calculator online can help you make more strategic investment decisions and set realistic financial goals.
- The calculator is free to use with many websites offering it online. You can use it multiple times as you like and make necessary changes to your finances based on the results.
Closing thoughts
Your net worth can fluctuate over time depending on the changing value of your assets and liabilities. Thus, it is recommended to make a habit of calculating your net worth every six months to have a good grip on your finances. A net worth calculator makes this entire calculation process easier by allowing you to input your current financial information and giving the results within a few seconds.