Your net worth is calculated by adding up the total value of your assets, minus the total value of your liabilities.
Whatever your net worth is today, it could all change tomorrow, or next week, or next year. That’s why it’s important to keep calculating your net worth periodically and tracking the movement.
If you’re not calculating your net worth every couple of weeks, start doing it.
In this video, I show you how.
STEP 1: GET YOUR ASSET VALUATIONS
Firstly, go through every bank account you own and every investment account you own. Don’t miss any. Check every last merchant account and PayPal account.
Do the same with your assets. If you own real estate, give each asset a dollar value. Do the same with your car and any other significant investment.
Then, add up the total of all your assets. If you have bank accounts in different currencies, do a currency conversion so that you can arrive at one final number.
If you have credit card debts, mortgages, bank loans or overdrafts, subtract these accounts from the total. This will give you your net assets.
Considering the number of different assets that MOBE owns, it might take me 45 minutes to do. Each time I do this, I record the number in a secret email account that no one else has access to.
STEP 2: MEASURE THE CHANGE
It’s important that you do this exercise periodically, not just once. This is how you’ll know whether your net worth is trending upward or downward.
Each time you calculate your net worth, also calculate the difference between your last update and your new net worth. Then, divide by the number of days since the last update.
For example, if your increase was $140,000 in the last 14 days, you know that your net worth increased by an average of $10,000 per day. Your investments may not be on this level yet, and maybe you only increased your net worth an average of $10 per day.
That’s OK. The important thing is that you’re always aware of it, and that it’s a positive difference. As long as it trends upwards over time, you are going in the right direction.
STEP 3: COMPARE TO YOUR TARGETS
If you really want to get serious about this exercise, decide on some targets. All wealthy people have targets. Their wealth doesn’t just happen by accident.
Give some serious thought as to what net worth would make you happy, 10 years from now. If your net worth increased by only $1,000 in 10 years, would you be happy? If not, then decide on a specific number. How much does the increase need to be to keep you happy?
Know the number, and be specific about the time frame, or you won’t get there. Then, keep calculating your net worth periodically and compare to this target.