How to Calculate Your Personal Net Worth

When choosing whether franchising is the best business model for you, it is essential to do extensive research. Doing this […]

When choosing whether franchising is the best business model for you, it is essential to do extensive research. Doing this will help you know the exact categories or sectors that will give you the best returns and those that match your skills. It will also help you to identify a suitable brand. After you have done your research, you need to think of your source of capital because you will need to make some investment to complete the deal. This step is vital to determine your net worth.

Franchisors need details about your overall financial status of net worth because it gives them the ability to determine whether you will be a risk to the business. This step also allows them to understand you more as a potential franchiser. Knowing your net worth is also important because it helps you to know whether you are a better saver or spender.

In case you don’t know your net worth, it is time you calculate. In simple terms, net worth helps to determine the monetary value of a person or a business. You can calculate it by subtracting the total amounts of all your liabilities from your assets. Other terms that refer to net worth are shareholders equity, liquidation value, or book value. Calculating your fundamental net worth is very simple. Still, sometimes you can be misled by the actual market value of some assets like real estate or loan portfolios which banks own because they are not easy to compute. Another thing is that some of the assets in the business books may not have the exact purchase price today as indicated, meaning that they can either be more or less.

Your main assets are;

● Money or cash that you have in your bank account, certificate of deposits (CDCs), or money market.

● Individual properties include your home, furniture, vehicles, jewelry, art, collectibles, and antiques.

● Investments such as bonds, stock, cash value of your life insurance, real estate, mutual funds, and annuities.

● Retirement savings such as employees’ pension plans are known as 401(k) or 403(b) accounts plus IRAs.

When it comes to liabilities, you should consider;

● Your credit card debts

● Real estate loans

● Car loans

● Other payable amounts of money you owe

You should subtract all the liabilities from the total assets to get your net worth.

In case your net worth amount is not what you had expected, you should not worry. The first thing you need to do is to clear your debts. You should also avoid spending more than the amount of money you have. In short, try to reduce your debts as quickly as possible. After you have cleared the debts, you should then focus on savings.

Setting aside some money every month will help you build your net worth. Another thing that can help you to build your net worth has a spouse who is earning. This part can help you to switch smoothly from your current business to franchising. After this, choose an investment partner who has the capital or the required net worth. You will have to share the business privileges, but building a successful franchise business is possible.