Why It's Important to Know Your Net Worth; How to Calculate 

A collage of a house apartment and a luxury car
A collage of a house apartment and a luxury car
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Declaring income, assets, and liabilities is mandatory for public servants in Kenya. 

The initial declaration is made thirty days after one is employed or assumes office. They are then required to declare their wealth after every two years and thirty days after leaving the service. 

Declaration of wealth aids the government in curbing corruption. However, analysts argue that other than public servants, its imperative for every income earner to understand how to calculate their net worth and its importance.

What is a Net Worth? 

 

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Over Ksh 37 billion fake currency seized on May 4, 2021.
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Net worth is the sum of all assets owned by a person or a company after deducting expenses, also known as liabilities.

How To Calculate your Net Worth?

Net worth is achieved by subtracting your total assets and liabilities. 

Assets include land, houses, life insurance, cars cash in checking and savings accounts and financial investments from shares to government bonds. 

Liabilities include debts, credit card expenses, loans and mortgages. 

It is important to know your net worth as it helps in measuring your financial progress, which can help you to figure out new strategies that can help to appreciate your value. 

To be in better financial shape, you ought to check your credit score and the amount you have saved. 

Ideally,  your assets should outweigh your liabilities, However, if you have more debts and liabilities than your assets, your net worth then becomes negative.

Additionally, your net worth can be in liquid form, which can easily be converted to cash. 

Individuals with a considerable net worth are known as high net worth individuals (HNWI) and form the prime market for wealth managers and investment counsellors.

If you’re seeking to get to your dream net worth, it is important to master your cash flow, be consistent with your savings and, most importantly, invest in appreciating assets.

 

An undated image of a plantation farm
An undated image of a plantation farm in Kenya
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Also, devise different ways of raising income. From earned, dividend, royalty, interest, profit, rental incomes and capital gains. 

Other Terminologies 

Annual asset growth

This is the average annual rate you expect your assets to increase or decrease in value. 

Annual liability growth

The average annual rate you expect your liabilities to increase or decrease in value. 

Financial experts will always aid you to calculate your net worth, or you may also do so via free financial websites online. 

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