Knowing Your Net Worth
by Muna Malin & Yuchen Wu, Student Bloggers
What’s your net worth? Your net worth is a great marker for how you are faring financially. It allows you to see where you stand and can be used to determine a financial plan for the future. Why is this important for students? Undergraduates, especially recent graduates, normally have extremely low net worth. According to the LA Times, the average net worth for college graduates under 40 years old is $8,700. For current students, the number is usually negative. It is very important for students to not only calculate their net worth, but to find ways to increase it over time.
Calculating your net worth is simple. Here’s how:
Step 1: Make a list of your assets
Find out how much you own. This could include your savings account, your car, your job, or even your house. Figure out how much they are worth now, not in the past. Then, add them together to get your total assets.
Step 2: Make a list of your liabilities.
Figure out how much you owe. It may include your credit cards, student loans, car loans, or any other sources. Add them up to get your total amount of liabilities.
Step 3: Calculate net worth
Use the equation “net worth = assets – liabilities”.
Step 4: Interpret your net worth
You are not just calculating a number. Rather, you want to know what your net worth means. It is okay to have a negative net worth at this point of your life, because most college graduates with loans have negative net worth.
Don’t like your number? Luckily, this is not permanent.You can develop a plan for the long-run to increase your net worth.
- Increase your savings.
- Reduce your debt.
- Begin investing to generate income.
- Get rid of unnecessary expenses.
Following these tips will help you on your path to becoming financially responsible and smart! If you need help with calculation, CU Money Sense has a useful Net Worth Calculator, which is very easy to use. All you have to do is plug in your information and it will calculate your worth for you!Share on Facebook