How to draw up a 'personal balance sheet' to determine your 'net worth'
How much are you worth?
To determine your ‘net worth’, subtract what you owe from what you own, using a “personal balance sheet” such as the one pictured below.
This net worth provides you with a realistic view of how well to you are doing with your financial planning. If the figure is growing year on year then you are on the way to improving your wealth. If it is not growing, you are effectively getting poorer.Paul Roelofse, Certified Financial Planner
Keep in mind that your net worth must improve at a rate faster than inflation for it to keep its value.
How to improve your net worth:
Reduce your liabilities. Try to get rid of all your debt sooner. Interest on debt is often higher than the returns found on investments especially when considering the risk needed to achieve the return.
Acquire high growth assets. Target investments that grow consistently over time, especially those with growth that compounds. In other words, investments that produce re-investable returns.
Kieno Kammies interviewed Paul Roelofse, a Certified Financial Planner.
Roelofse penned this blog post on your personal balance sheet.
Listen to the interview in the audio below.
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