A brief introduction to net worth.
Net worth is determined by subtracting your liabilities from your assets. The product is a real assessment of your current financial situation. Net worth and cash flow are the cumulative result of all financial decisions that we make. The net worth calculation provides a wealth of information that can be used to establish goals and develop a planning strategy.
Calculation of net worth can be done with a variety of tools. Though many tools exist, they all must involve the essential concept of subtracting liabilities from assets.
Net worth allows us to assess our current financial situation and allows us to set short and long-term goals based on solid data. Setting annual net worth goals is an effective strategy, but the results will only be as good as the process and the data involved. When setting net worth goals, it is important to be realistic.
Developing a net worth plan may seem intimidating, but the process is relatively simple. Subsequent evaluations become much easier as organization and proficiency increases.