Many people believe that having so many properties gives value with their name but in fact what counts is one's Networth Inside. The bottom value may be the single most important value this 1 should look at and not the worthiness of the assets you have accumulated. You may have four Jaguars parked at your mansion but those are nothing if you have no net worth.
With this lets give attention to Net Worth.
It is defined as: "The total amount where a company or individual's assets exceed their liabilities. "
In accounting it is explained by re-arranging the Balance Sheet equation: Capital (Net Worth) = Asset - Liability
Where: Asset = things you or your organization own
Liability = things you or your organization owe to another person
With this particular Net Worth simply means your actual value.
That is important because as you compares a company to another you have to look where the company stands. A business which has a positive net worth simply means it is well funded thus it has the capacity to fund its current operation without concern with default in paying suppliers.
A poor net worth commonly called deficit on another hand means that a company is out of enough assets to settle its obligations. There's a fear that operations may stop and creditors may run after the company's asset to satisfy obligations. It entails that the company is more of a type which will be owned by its creditors as opposed to its owners.
Looking back at my past post about simply how much is money you have one must think of it as your net worth. I'm currently reading "The Millionaire Next Door" that has been a survey changed to book by Thomas Stanley & William Danko. It is just a survey to find out what're the most popular factors among America's millionaires. One topic was about one's net worth.
The expected net worth formula from "The Millionaire Next Door" is like this:
Age X Gross Annual Income/10
I was shocked when I computed my expected net worth. My computations resulted to about $ 85,000.00 based on my salary and age but to date I just have twenty something thousand in my own name yikes. You may ask me why age becomes an issue in this equation. Age is an essential factor because over the years you need to have accumulated that amount of cash if you have a fixed amount of income like your salary. It indicates not only saving cash but additionally earning from that savings. As Bob Proctor said "Money isn't meant to be hoarded, it ought to be circulated." If you place your cash in your bamboo alcansya (Pinoy style piggy bank) that amount you expect to have when that piggy bank is full is the amount you've dropped on it. Probably it is wise to truly save but there's also a wiser solution to utilize that money. If you're familiar with the parable of the talents you will know why keeping money is wrong.
Likewise you must differentiate spending from circulating money; there's a lot of kilometer difference between this two. Once you spend you let go of the money. Once you circulate it indicates it comes back with additional money. Grow money; that what it way to circulate money. Putting it in a bank for 2-3% interest is not that bad, if you have a small business plan that you think you are able to manage well probably putting your cash you will have better. Investing on another hand is for the future thus it is very important for you really to know your net worth.
By knowing your net worth you will have a way to choose simply how much you don't have and simply how much of that you could freely place in a long haul investment. When you yourself have time and if you intend to know your expected net worth try the equation above, it will make you think where have spend all that money that you've earned from your job these past years.
Louis Delos Angeles holds a Philippine Certified Public Accountant license and the blogger behind Purchasing Philippines. Louis blogs and shares his experiences and ideas about just how to be debt free, how to start investing in the Philippine Stock Market, and just how to be an earning e-book author.
Louis may be reached by email at louis.delosangeles@gmail.com or through his blog http://www.invetsinginphilippines.blogspot.com