Question

What are some examples of assets,and liabilities, should be considered when calculating the net worth method?

how would you find it?

Answer 1

Answer:-

Importantly, a high income doesn't necessarily translate to a high net worth, which is why the latter is often a better benchmark for measuring wealth. As of 2016, the typical American family had a net worth of $97,290.

Here's how to calculate yours:

How to calculate net worth

1. List your assets

First you need to list out everything you own that has substantial value. While this does include some intangible assets like your investment accounts, it does not include your salary. Your income is part of your cash flow, not your net worth.

Here's what you should include:

• Modes of transportation, including cars, motorcycles, and boats (note that there is a more complicated calculation to determine the actual value of depreciating assets like these, but we won't get into it for the sake of this example)
• The market value of your home, if you own it
• The cash value of a permanent life insurance policy
• The balance of any retirement accounts
• The balance of any taxable investment accounts
• The balance of any savings accounts
• The balance of any checking accounts

Some things you may consider including:

• The cash value of any expensive jewelry, fine art, furniture, or clothing
• Business interests

2. List your debts

Your debt is what you owe to creditors or lenders.

Here's what you should include:

• The balance of any mortgage(s)
• The total balance on any student loans
• The balance of an auto loan
• The balance of a personal loan
• The balance of a business loan
• The outstanding balance on any credit cards
• Any outstanding tax liability

3. Subtract your liabilities from your assets

After tallying up the above figures, you'll need to subtract your liabilities from your assets. The number you're left with is your net worth. The formula looks like this:

Assets - liabilities = net worth

But remember that net worth is a snapshot in time. If you're regularly making debt payments, or saving automatically in your 401(k), for example, your net worth will rise over time.

On the flip side, if you take out a new loan or rack up a big credit-card bill, your net worth may fall. You can use an online tool like Personal Capital to link up all your accounts and automatically update your net worth and track it over time.

Net worth isn't the be-all and end-all when it comes to financial health, but it can be a simple and valuable tool for tracking progress toward your financial goals.