If you want to learn something today, learning about what is your net worth is the most important thing you could do. Knowing how are you doing in terms of net worth, will make you take a different number of actions: change your lifestyle, get out of debt, recalculate priorities, etc.
Depending on your lifestyle, calculating the net worth might be a painful task; most of people are in debt and don’t have many assets in their possession. So you might have a positive or a negative net worth; meaning you could be on debt with everything you have, or you could be near the limit. Now, if you read so far and are still here, you probably don’t know your net worth so read on to find out.
It might be a brutal truth, but it’s going to help you wake up to reality and start taking actions.
First thing you should do is making a list with all your assets. This means stuff that you own: for example a house, if you already paid for it. Or your crypto assets, bank savings, etc. Then, you make a list with all your liabilities (stuff that costs you money – your debts). Here you put stuff like the house mortgage, credit card debts, maybe a car loan. You get the idea, all the stuff that has a value on one list and all the stuff that subtracts value and costs you money, on the other list. Then you subtract the liabilities from your assets and you get you net worth.
Be careful, if you bought a car with a credit loan, and let’s say you already paid 50% of that car credit loan back, then here is how you calculate liabilities vs. assets on the car: the amount you owe to the bank is a liability. Half of the car price, the price you already paid form, at the actual market sell price, is your asset.
The formula: Assets – Debts = Your Net Worth
I did this a long time ago and I was shocked: I was in debt, with a negative net worth. I was owing money to friends, to banks, my car was on a loan, I had a credit card. The first thing I did was to start making a plan for closing all debt, I started to pay the small debts and make up a monthly plan for paying large ones based on a strict calendar.
After I paid for everything, I started to invest the money I used to pay on my debts into crypto.
I am still doing it now. You can invest as much as you want, as long as you don’t have any debt. I know people who got into debt for buying crypto, but I wouldn’t recommend it. So basically, you start by learning to save money for paying debts and not get into more debts. And after you pay all debts, you start investing same amounts into crypto (or something else if you want).
You will be building your net worth month by month.
It’s gonna be hard, you will have to make sacrifices, but staying out of debt is the most important thing you could do. It brings peace of mind and emotional stability. Your sleep will get better, your emotional life will get better, everything will get better.