We've all heard the question, "What's your net worth." either from a financial advisor or a financial institution or in general conversations. So let's dive into understanding net worth and how to track it, increase it, and use it best.
What is net worth?
Net worth is the simple value of your assets minus the liabilities you owe. It is one of the important ways to gauge your financial health, providing a valuable snapshot of your current financial position. To know or calculate your net worth, it's essential to put a number to the value of all your assets and liabilities.
How to Calculate Net Worth
Your net worth is calculated by subtracting the sum of all your liabilities from the total of all your assets.
Asset Total - Liabilities Liabilities = Net Worth
An asset is anything owned with monetary value (bank accounts, savings, stocks, cryptocurrencies, properties, high-value collectibles, etc.). While liabilities are debts and obligations you must pay (including loans, credit cards, accounts payable, mortgages, personal loans, loans owed to family members, student loans, etc.).
Your net worth can be either positive or negative. Your net worth becomes negative when your liabilities are higher than your assets, while it is positive when assets are higher than your liabilities. A Positive and increasing net worth indicates good financial health, while a negative or decreasing net worth shows concerns about your financial health.
Best way to automate tracking your assets
Because our holdings are constantly changing, and sometimes, some bank loans are racking up other interests, it's essential to automatically keep track of our net worth by tracking our assets and liabilities.
Cova offers the best and most automated way to keep track of your net worth by automatically tracking your assets, your liabilities and ensuring you can easily carry your financial planner and family members along. Cova lets you connect bank accounts, stock holdings, crypto assets, properties and credit cards, and other loans. Cova users can also securely manage notes and documents critical to their finances.
In closing
Net worth is a good way of understanding an individual's true wealth or financial health. Using your assets alone to calculate your net worth is misleading. It's never too early to start keeping track.
