How to calculate my Net worth?
It is a simple two step process :
1. Add all your invest-able Assets
According to the authors of, 'The Millionaire next door', "Multiply YOUR AGE times YOUR INCOME(realized pretax annual household income from all sources except inheritances). Divide by TEN. This, less any INHERITED WEALTH, is what your net worth should be"
How did you fare?
Example:
Age: 40
Annual Income: $100,000
Inherited wealth: $25,000
Your Net Worth should be : 40 x (100,000/10) - 25,000 = $375,000
It is a simple two step process :
1. Add all your invest-able Assets
- Cash ( In savings account, not your salary)
- Present market value of your home, retirement savings, mutual funds,..
- Gold
- Present Market value of stocks/bonds/other investments owned
- Market value of any inheritance
2. Subtract all your Liabilities
- Mortgage
- Car loan
- Student loan
- Credit Card loan
- Anything that you owe to banks/friends/relatives
And you have the answer to: What is your net worth?
How did you fare?
Example:
Age: 40
Annual Income: $100,000
Inherited wealth: $25,000
Your Net Worth should be : 40 x (100,000/10) - 25,000 = $375,000
1 comment:
When considering PV of Home, it would be more conservative to do it post tax.
Similarly one can use the KBB trade in value of ones car.
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