Measuring Your Net Worth
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The importance of having a financial plan cannot be overstated. If you want to achieve your financial goals, then it is imperative that your chalk out a robust financial plan. However, it is equally important to understand that the financial plan will be effective only if it is customised to reflect your idiosyncratic risk/return requirements and personal, as well as, professional circumstances. As you embark on your financial journey you must ensure that you are headed in the right direction. The first step towards determining this is to calculate your current networth. All your future investment decisions will hinge upon your understanding of your networth and consequent ability to absorb risk.

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What exactly is net worth? 

Your net worth is basically everything that is left over after you subtract all your financial liabilities or debts from your total financial assets. From this it is clear that a positive and higher networth is always desirable. Your financial assets may include money in bank accounts, investments in fixed deposits, stocks, bonds, mutual fund shares, assets in retirement accounts, and the value of any real estate you own. It is important to note that unless you plan to sell your home and your car, you should not include them among your financial assets. Your financial liabilities may include outstanding loans and credit card debt. 

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Your net worth is a measure of your financial health and your potential ability to meet your long-term goals. Treat it as a starting point for your long-term financial strategy. Once you put your net worth in perspective, you'll be ready to develop and implement a suitable long-term financial plan with the assistance of a qualified financial professional.

Where to begin?

The first step is to account for all your financial assets.

Bank accounts (savings, current) Rs _____________

Liquid funds Rs _____________

Bank fixed deposits Rs ___________

Retirement accounts (provident fund, public provident fund) Rs _________

Mutual fund investments Rs ____________

Direct equity investments Rs _________________

Company fixed deposits and corporate bonds Rs ___________

Non-residential real estate Rs ____________

Total assets Rs ______

Accounting for your financial liabilities

Home loans Rs ___________

Personal loan Rs ___________

Car loan Rs ___________

Education loan Rs _____________

Any unsecured loans Rs __________

Credit card balance Rs__________

Other outstanding liability Rs_________

Total liabilities Rs _________

Your net worth = Total financial assets less total financial liabilities = Rs __________

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