How much are you worth today? Is your net worth positive or negative? Should you care if you know your net worth? Take this quiz to check whether you know the how and why of net worth calculations.
What is the purpose of calculating your net worth?
Calculating your net worth will help you to decide if you need to hire a certified financial planner.
Calculating your net worth will give you an accurate picture of where you stand financially.
Calculating your net worth helps you to decide which investments to buy.
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The purpose of calculating your net worth and updating figures regularly is to have an accurate picture of where you are financially. Knowing your net worth can be a powerful financial planning tool.
Net worth is how much money you have available as a safety net if you sold your liquid assets.
Net worth is a calculation of cash left for investments after you subtract living expenses from your salary.
Net worth is a dollar amount representing money left if you sold everything and paid off your debts.
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Net worth is a dollar amount representing money you would have left if you sold everything and paid off your debts. You need to know where you are now in order to plan where you are going financially.
What revelation must you prepare yourself for when you are completing your net worth calculation?
You may find out that you have a negative net worth.
You may have difficulty finding a realistic value for many of your items.
You may have a difficult time deciding if some items are liabilities or assets.
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When you finish your calculation you may find out that you have a negative net worth. If you do come out in the red, it does not mean that you need to panic.
If you finish the calculation and have a positive net worth, what now?
Just relax and carry on, content in the knowledge that you are in good financial standing.
Now decide how to use your funds wisely to secure your future.
Take your list of assets and divide them into liquid assets and fixed assets.
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If you have a positive net worth it means that you own more than you owe. Now is the time to see if you can use some of your funds to increase your wealth.
How can you best determine the realistic worth of assets such as vehicles, RVs and boats?
Do a price comparison on the Internet.
Subtract deprecation and loan balance from the original purchase price.
Check the current blue book value.
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The best way to determine the current value of assets such as cars, RVs and boats is to look up the blue book value. Industry professionals use current blue book value to set realistic prices for such items.
Liquid assets are cash on hand along with the balance in checking accounts and savings account.
Liquid assets are valuables that can easily be converted if you need money quickly.
Liquid assets consist of stocks and bonds that can be converted to cash.
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Liquid assets include the items in the first and last answer choice in addition to many other items. Liquid assets are defined as valuables that can be easily and quickly converted to cash without significant loss.
What should you do with an item that you are sure is valuable but have little idea what it is actually worth.
If the item has sentimental value, it is best to leave it off the list.
Arrange a professional appraisal.
Do both of the above.
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If you have an item that has special sentimental value to you and you would not consider parting with it, it is best to leave the item off your list. You should still get a professional appraisal as it could be worth more for its financial value than its sentimental value.
What are some of the most common liabilities used in a net worth calculation?
Liabilities include all loan principal amounts and all credit card limits.
Liabilities include all current loan and credit card balances.
Liabilities include monthly utility bills, commuting costs and living expenses.
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When calculating net worth liabilities include all current loan and credit card balances. You need to calculate the money it will take to pay the loans, mortgages and credit cards off and not the original loan amount.
What do you need to keep in mind when calculating a value for major assets like your home and car?
Use the full market value of the item as an asset regardless of how much you owe on it.
Subtract the amount you owe on the item from its current worth, the remainder is the asset value.
Do not count items like homes, cars and boats when you still owe a significant amount of money on them.
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It is very important to note the full market value of assets like homes, vehicles and boats. When you list liabilities, the amount you owe on these items will be included and the final calculation will subtract the amount you owe on them from their full market value.
What should you carefully consider if you have a negative net worth and are thinking about taking a debt consolidation loan?
Debt consolidation is not a bad idea if you are careful that you do not end up with a higher interest rate.
Debt consolidation will have a negative impact on your credit score.
Debt consolidation will often result in a payment that is higher than the total of your current payments.
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With a debt consolidation loan, you can pay off all your loans and credit cards. You will have a lower payment than your current total payments, but be careful that the interest you pay is not higher and you should also destroy most if not all of your credit cards.
