What is net worth?
Net worth is defined as all of your assest minus your all of your liabilities. To put it another way it is the total value of everything you own minus the total value of everything you owe. If you owe more than you own, you have a negative net worth. If you own more than you owe you will have a positive net worth.
Why is calculating net worth important?
Net worth is a gauge of your financial health. If you plan on setting a findependence day then you need to calculate your net worth on a regular basis. If you see a negative shift in your net worth then you can identify it quickly and resolve it before it gets out of hand like piling credit card debit.
Our current net worth:
Savings: We currently maintain $4500 in our personal checking accounts so we don’t have to pay any banking fees. As well a large portion is being held in savings which will then be put as a lump sum towards my RRSP contribution for 2008. The rest in our accounts is being set aside for an emergency fund.
Mortgage: There is debate on how one should include their home in their net worth. Some people try and track the present value of their mortgage and others prefer to use their purchase price and leave it at that. I’m in the latter camp. I feel tracking the value of your home on a month to month basis isn’t worth while. We have no intention of selling since we need a place to live and it takes away from true net worth growth of saving and investing properly.
Vehicle: We are currently leasing our vehicle. This is preexisting to my fiance and I meeting. Our intention is to ultimately purchase the car once the lease expires. We won’t be tracking its value as it is a depreciating asset and serves no purpose in helping us achieve our goals. It’s benefit comes in the way of us running this car for as long as possible allowing us to save and invest more.
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Related posts:
- Net Worth Update - January 2009
- Net Worth Update - February 2009
- Net Worth Update - May 2009
- Net Worth Update - April 2009
- Net Worth Update - August 2009
