Know your net worth including the value of your business, because you can’t improve what you don’t measure
It is important to spend time doing some periodic analysis of where we stand from a net worth standpoint. If you do not know what your net worth is, it’s time to find out because you can’t improve what you don’t measure. The first step in determining your net worth is to create a balance sheet. If you don’t know what that is, look it up. It’s simple and you can do this on a piece of paper or in an excel spreadsheet. No fancy tools required.
In one column put all your assets. That’s everything that has value: real estate, cash, stocks, etc. Forget jewelry, forget clothes, and just include the things that realistically have value where if you needed to sell and liquidate, you could easily. On the other side you put all your liabilities, all your debt. This would include credit card debt, mortgages, personal loans, business loans. Anything that you owe money to is on the liabilities side. The difference between the two, your assets minus your liabilities, is your net worth.
Take a look at that every so often and see where you stand. If you are a business owner, learn how to evaluate your business too. There is a real art form and skill in that. There are also tactics that can help you create more value for your company. Profit is the most important metric but there are other metrics as well. Can your business survive without you? Do you have a lot of fixed liabilities associated with your business? Understanding the things that can make your own business more valuable can substantially improve your net worth. Check your net worth every quarter or at least annually.
After you’ve determined what your net worth is, it will be much easier to see where you can improve. Do you have sufficient assets? Retirement accounts, savings accounts, investment accounts, etc. What about your liabilities? Do you owe more than you own? If so, that’s a problem. By calculating your net worth you’ll be able to see more clearly what your financial picture looks like, and then improve it.
Take steps today for a prosperous future.
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