Ever wondered how rich you really are? Many people think that the amount you are worth is simply how much money you currently have to spend, but this couldn’t be further from the truth. To find out how much you are really worth, you need to caclulate your net worth, which is the ultimate measurement of your financial health and the best part about it is, you can start tracking it at any point in your life regardless of your financial status. In this article, we are going to talk about net worth, how it’s calculated, and why it matters.

As I just mentioned, many people often assume that the amount of money you have to spend is what determines how much you are worth, but this is only a portion of your total worth. Instead, to calculate your net worth you take the amount of money (or liquid assets) you have plus the amount of possessions (such as your home, furniture, electronics, investments, and more) and subtract your liablities from that (such as loans, mortgages, etc). In other words, you take what you owe and subtract it from what you own to find how much you are ultimately worth.

Now you may be asking yourself, why does knowing your new worth even matter? Well, it can help you improve your financial health in severla ways. These include, helping you make large financial decisions, reduce your financial stress, plan for your future, prepare you for emergencies, reveal financial blind spots (such as debt or rapidly depreciating items), and help you to set financial goals.

Understanding your net worth is a key to help you take control of your finances by allowing you to set goals, track your progress, and make smarter decisions. The effects are clear, so start calculating your net worth today and just watch how much it helps you make large financial improvements both now and overtime.