The Networth formula is quite simple
Networth = Assets – Liabilities
So, if you have assets of Rs. 2 crores and your liabilities are 50 lacs, your net worth is Rs 1.5 crores.
We have always been taught to calculate networth this way and there is nothing wrong with that, however, it’s a very simplified version of calculating your net worth, which does not give any kind of insights or information to you.
A lot of times, you may also get the wrong impression about someone because of this over-simplified formula. A lot of investors on paper are having good networth, but they never feel RICH or satisfied with what everyone thinks about them.
For example, imagine a person who lives in a house worth 2 crores (no loans) and also has another real estate worth 1 crore, plus mutual funds worth Rs 50 lacs.
Now, what is his/her net worth?
- Some will say that the person’s net worth is Rs 3.5 crores (2 cr+1 cr+ 50 lacs) as per our simple definition?
- Some will say that we…
