FutureStarr

What Is a Net Worthor

What Is a Net Worthor

What Is a Net Worth

One thing you need to focus on when calculating your net worth is what to include and what to leave out. As with all things, there are exceptions, but for most "rules of thumb" apply.

Net

In business, net worth is also known as book value or shareholders' equity. The balance sheet is also known as a net worth statement. The value of a company's equity equals the difference between the value of total assets and total liabilities. Note that the values on a company's balance sheet highlight historical costs or book values, not current market values.

Examples of liabilities, otherwise known as debt, include mortgages, credit card balances, student loans, and car loans. An individual's assets, meanwhile, include checking and savings account balances, the value of securities such as stocks or bonds, real property value, the market value of an automobile, et al. Whatever is left after selling all assets and paying off personal debt is the net worth. (Source: www.investopedia.com)

People

People with a substantial net worth are known as high net worth individuals (HNWI), and form the prime market for wealth managers and investment counselors. Investors with a net worth, excluding their primary residence, of at least $1 million—either alone or together with their spouse—are "accredited investors" in the eyes of the Securities and Exchange Commission (SEC), and, therefore, permitted to invest in unregistered securities offerings.

Negative net worth is a sign that an individual or family needs to focus its energy on debt reduction. A tough budget, use of debt reduction strategies such as the debt snowball or debt avalanche, and perhaps negotiation of some debts with creditors can sometimes help people climb out of a negative net worth hole and start building up their resources. Early in life, a negative net worth is not uncommon—student loans mean even the most careful-with-money young people can start out owing more than they own. Family responsibilities or an unexpected illness can also push people into the red. (Source: www.investopedia.com)

 

 

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