Entrepreneurs and business owners need a working knowledge of the world of finance, and not just from the point of view of their business interests. Due to the unique nature of their relationship with their company, the lines between personal finances and business-related finances invariably become blurred. In order to make sure their business decisions take into account personal circumstances, it is important to develop a detailed and comprehensive understanding of their own financial situation.
Finding out your net worth is one of the first and most important steps to take in developing this crucial understanding. It is a process that every business owner and entrepreneur should go through regularly.
What is net worth?
Net worth is the result of a calculation that balances the value of assets against the value of liabilities. It is the difference between what you own and what you owe. Individuals with more assets than liabilities are said to have a positive net worth, while those with more liabilities than assets have a negative net worth. The more accurate and detailed the information put into the calculation, the truer the picture of the end result will be.
Net worth is a sort of headline figure that gives quick and clear insight into your financial circumstances. Tracked over time, it can indicate a range of things, such as whether or not your financial situation is improving, how your business interests are performing to improve your financial situation, or how your business interests may be hurting your financial situation. Knowing your net worth is essential in order to make sure that business decisions are properly informed and risks are properly managed.
Working out your net worth
While the calculation is relatively straightforward in theory, it is actually a fairly complex equation. All property must be included in the list of assets, and every form of debt needs to be counted in the list of liabilities. Therefore, an individual with even the most basic range of assets and liabilities needs to take into account a daunting range of considerations.
Many high earners, successful business owners, entrepreneurs, and individuals seeking to make good financial investments obtain support and advice from trusted financial advisors, who have the sort of specialist expertise that only comes from extensive experience in this unique and complex area. The financial experts at Fisher Investments can help you work out your net worth and advise you on how to apply this knowledge most effectively.
As well as providing critical information for establishing a successful investment portfolio, the expert financial specialists at Fisher Investments can also help you make personal decisions about retirement options, tax and estate strategies, and other financial opportunities.
Improving your net worth
Improving your net worth has implications on a wide range of things, including retirement and investment options. Therefore, it is a worthy goal for anyone, not just business owners. There are numerous ways to achieve this improvement, many of which are based on good financial management. Here are three of the most important aspects to consider:
- Reduce your debt. Liabilities form one-half of the net worth equation, so reducing them has a significant impact on the end result. Knowing your net worth enables you to identify which debts need to be addressed as a matter of urgency, and which liabilities can be managed over a longer period of time.
- Improve your savings and investments. This is the other side of the equation, the side that calls for improvement and enhancement. Simply putting money aside is not always the best way to achieve this, and all options with regard to investment opportunities should be taken into consideration.
- Develop good spending habits. To help maximize the impact of the previous two, it is critical to address bad spending habits and reduce or eliminate unnecessary expenditure.
Successful business owners and entrepreneurs understand that knowledge and insight are among their biggest assets. Knowledge and insight into one’s own financial situation is the best place to start.
Understanding your net worth should be a key part of the foundation of any personal finance strategy because it provides the sort of information that can help reduce risks and facilitate the effective decision-making. Enlisting the help and advice of trusted sources is one of the best ways to make sure that the information received is as accurate and helpful as possible.