Net worth

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Net worth is the amount by which assets exceed liabilities. (Assets – Liabilities)

Another way to say this is, it's the value of everything we own, minus all our debts. 

Net worth is a concept that can be applied to both individuals and businesses, as a measure of how much they are really worth.

A consistent increase in net worth indicates good financial health; conversely, net worth may be depleted by a substantial decrease in asset values relative to liabilities.

While calculating our net worth following are the assets to be considered

v  Liquid Assets – May be cash or money in savings account

v  Debt Assets – PPF /EPF, Bonds/Debentures, Debt mutual funds, Insurance policies

v  Equity – Shares, Equity oriented mutual funds, Unit Linked Insurance Policies

v  Real Estate – Land / Plot (Commercial), Second Home etc

v  Gold- Physical (in the form of coins/ bars), Sovereign gold bonds/ Gold ETF’s

v  Personal Assets- Home, Jewellery, Vehicles

Liabilities to be considered are –

v  Home Loans – Loans for our dream home / may be renovation of our home

v  Vehicle Loans – Loan for two wheelers/ Four wheelers etc

v  Personal Loans – Taken from banks, money lenders, or family members/ friends

v  Gold Loan – Through banks or non banking institutions

v  Loans Against Securities – Loan against shares, mutual funds, PPF, real estate.

Hence, net worth calculations include each and every aspect of our assets and liabilities

Net worth is the mirror of our financial health. It shows our real worth.