Today, many young people in Nigeria are obsessed with finding out who is the latest celebrity, who has the latest cars, and most significantly, what their net worth is. According to research, net worth is googled daily at an alarming rate. The myth people have is that net worth only covers cash in the bank, and by so doing, they fail to take cognizance of property.
What is Net Worth?
Net worth is the number of assets a person has, minus liabilities. This means both financial, physical, and intangible assets minus liabilities equals the net worth. To calculate the person’s net worth will be to figure how much their assets are minus how much their current liability costs.
Bringing it down to who we are as individuals and young people, the net worth might seem significant. Not just companies that have big firms, but even individuals have net worth, only that most times, we end up buying liabilities and consider them assets.
What are Assets and Liabilities?
Assets have intangible properties that make money due to their use of their inactiveness or putting them somewhere. These are called assets, while liabilities are properties or possessions that cost money and reduce in value as time goes. This makes fair sense when you bring it down to an individual level. Anybody can calculate their net worth if they put their minds to it, so here’s a quick example of how to calculate net worth.
Net worth = assets minus liabilities.
It’s straightforward
How to build a net worth
It is as simple as finding a way to reduce your expenditure and reduce the liability you own. Reducing the liability is either by selling or giving up liability for hire purchase. Having a house that sits without anybody using it is a liability, but once the home is given out for rent, it begins to bring revenue and profit, becoming an asset. This is a great way to turn your liabilities into assets.Another way to grow on net worth is to reduce your liability. For example, if you have so many cars, cut them down by giving to uber drivers or restrict ownership to a vehicle that can be maintained in a way that would not bleed your finances in years to come.
A third way to increase your net worth is to increase your asset. Instead of purchasing liabilities, continually buy properties or possessions that rise in value over time, like gold, Bitcoin, or any foreign currency.
In Conclusion
Net worth is not just about money. It also has to do sometimes with social currency. This increases the ability to borrow from banks too. Banks always ascertain a network so that in case of a breach of contract agreement, they can quickly liquidate assets to regain loan plus interests. It is not too early to increase your net worth, as it helps with credibility when taking loans in banks.
Featured image source: Corporate Finance InstituteGot a suggestion? Contact us: editor@connectnigeria.com
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