It is essential to establish an idea of where you want to start and a way of measuring the progress you make in planning everything. The best place to begin financial planning for your own personal needs is to calculate the value of your “personal Net Worth.” This will give you a an overall picture of the overall financial situation.
Begin your list of assets with your major financial resources – - the current balance of your Thrift Savings Plan (TSP) account, and the market value of your house. After that, write down the market value of any other investments, bank account balances and the cash amount of any insurance policies. Then, estimate the value of your cars, appliances and other belongings. Click over here to discover a useful reference on net worth.
The mortgage balance is the top item on your list of liabilities, followed by any funds that you are owed on home equity or auto credit cards or loans as well as any taxes you’ll need to pay. Your net worth is the total value of your assets as well as your liabilities.
Still confused? Here are three different ways to assess the value of your net worth
You can check your progress
By periodically determining your net worth, you can evaluate the progress you’ve made toward your long-term goals, which includes saving enough for your retirement to enjoy a comfortable one. Each time you calculate your networth it will allow you to monitor the growth of your retirement savings. In addition, tracking your progress gives you the opportunity to adjust your plans if you think that your retirement funds are slowing growing.
Make sure you are aware of your reserve
The calculation of the value of your net net worth meaning can also show the amount of margin of financial error you are able to afford. Divide your financial assets and liabilities into two groups which are current and long-term. Determine how much cash that you could put in the bank in a short time if necessary. A savings account at a bank can be an example. an asset for current use that can quickly convert into cash. Selling an asset, such as your home takes a lot of work. A mortgage is a large and long-term risk, but the cash-flow impact for the mortgage payments could be quite low.
Analyze your spending and saving patterns
It is also possible to use a net worth calculation to help you measure your performance. What do you think of your progress? Are your assets better(or more or less) than the previous year? This is also an opportunity to look at your patterns of saving and spending. What is your income? What can you do to improve your performance next year? Saving more money for your future needs, both short and long-term can help increase your net money over time.
