Setting money goals for yourself can be a great way to boost your financial progression in life, but before you plan, get to know your net worth for an excellent place to start. Knowing your net worth helps you understand your current financial situation and gives you a point of reference for measuring progress.
Jason Kulpa, Net Worth expert and successful entrepreneur, has built multiple businesses, including UE.co, San Diego’s Fastest Growing Business multi-year award winner. Navigating a net worth is crucial when starting and operating numerous organizations. A “net worth” statement or “balance sheet” is designed to provide a snapshot of the financial soundness of your business at any specific time. Here, Mr. Kulpa further explains the ins and outs of understanding net worth.
What is your net worth?
Net worth is how much you are worth financially as a person, or your measurement of wealth. Net worth quantifies the financial value of more than just people but also entities, corporations, sectors, cities, and countries. You find a net worth by subtracting liabilities from assets. Here is the equation:
Assets – Liabilities = Net Worth
While you are progressing towards your financial goals, use the net worth equation at any current time to determine what your present financial position looks like and where you are in your development. If you have more assets than liabilities, you have a positive net worth, which is where you want to set your goal. Negative net worth is when your liabilities outweigh your assets.
What is an asset?
An asset is something that holds value or financial worth. Assets categorize in the same way as liabilities. They are either current, intermediate, or long term. Current assets can be liquidated into cash quickly or are currently in cash form. Intermediate assets are useful for no less than one year, such as machinery. Long term assets include land, real estate, buildings, or facilities.
What is a liability?
Your liabilities would include all of your debts or any money that you owe. Current liabilities consist of current payments, such as a loan or interest payments. Intermediate liabilities include any outstanding debt payments after the accountable year. Long term liabilities are debts that accumulate through long term asset purchases that need twenty or more years before being completely paid off.
How do you increase your net worth?
As discussed earlier, positive net worth is where you want to set your financial aims first. You achieve a positive net worth when you have shown you can handle your debts or when you have none. Shedding your liabilities is a great way to increase your net worth. As you can guess, the higher the net worth, the better, and getting rid of burdensome debt will only make way for a higher net worth value and obtaining good financial health.
Another simple way to increase your net worth is realizing that your net worth is a reflection of what you can keep, not spend. Your spending habits can quickly decrease your net worth. Focus on more conservative financial planning, and set the ultimate goal of saving.
About Jason Kulpa
Jason Kulpa is the Founder and former CEO of UE.co and a San Diego’s two-time winner of the Most Admired CEO Award of the San Diego Business Journal and also a semi-finalist for the Ernst and Young Entrepreneur award. Under Mr. Kulpa’s leadership, in 2018, his teams volunteered at over 24 events and worked side-by-side to improve the San Diego community. Jason’s mission to bring awareness, support, and inclusion for special needs causes. Jason’s mission to bring awareness, support, and inclusion for special needs causes.