The first step towards FIRE is to calculate your net worth.
Step 1 : calculate your net worth
Step 2 : create a budget
Step 3 : pay off debt (excl. mortgage)
Step 4 : create an emergency fund
Step 5 : build a financial plan
Step 6 : invest and “stay the course”
How do I calculate my net worth?
Simply put, you add up all your possessions and subtract your debts.
The average Belgian had a net wealth of 244.000 euro, including real estate.
De Tijd (1)
Let’s start with your possessions.
Own residence
A common possession is your own residence (sorry renters 😉 ). When you know the value of your residence, fine! When you don’t know the value, you can calculate it in several ways.
You can search for similar properties on real estate websites. Similar means in this case : same region, same type of real estate (house or apartment), about the same building year, with just as many bedroom(s) and bathroom(s), about the same area in square meters and (if applicable) the same garden and/or patio size.
Another option is to have your residence estimated by a professional. A real estate agent can help you, in some cases no costs are charged in the hope of being able to sell your property. You can also have your home appraised by a surveyor or architect, but this will incur costs of around 250 to 500 euros.
If you own other investment properties, you can proceed the same way for these and add them to your possessions as well.
Other non-financial possessions
An example of another possession is a car. You can estimate this online by searching for comparable cars on classified websites.
Your furniture, home supplies, collector’s items and all kinds of collections also fall into this category, so estimate! I do recommend that you estimate realistically, otherwise you cut into your skin when calculating your own net worth …
Financial possessions
Now we are switching to banking products.
Make an overview of all checking and saving accounts with corresponding amounts. When you save for retirement or have a life insurance you may note these as well.
Investments at a bank or broker also belong here, it is best to list them separately in your overview. More detail is better.
Debts
The most common debt, and usually the largest, is your mortgage loan. Every year you will receive an annual statement with the outstanding debt from your bank, or you can also contact your bank to know the amount.
But other debts are also possible. Do you have a car loan? Or a debt to friends/family? Overdraft on your checking account? Credit card debt? Or other debts? List each type of debt separately in your overview. If you have no debts other than a mortgage loan, congratulations! You’re on the right track.
Write your possessions and debts one by one and calculate your own net worth.
Through comparison: in 2020 the average Belgian had a net wealth of 244.000 euro, including real estate (1).
Let me show you an example…
(disclaimer: fictitious amounts)
Possessions
Own residence : 250.000
Car : 6.500
Furniture : 3.000
Household goods : 750
Stamp collection : 750
Checking account : 1.225
Savings account : 10.000
Pension saving : 2.732
Investment at broker X : 5.600
Debts
Mortgage loan : 225.000
Car loan : 3.765
Total possessions : 280.557
Total debts : 228.765
Net worth : 51.792
In the next blog post I’ll explain budgeting!
This info is for informational, educational and entertainment purposes only, and does not constitute financial, accounting, or legal advice. Please do your own research (disclaimer).
Sources :
(1)Vervenne, W. (2021, April 14). Belgen 137 miljard euro rijker in coronajaar. De Tijd. https://www.tijd.be/markten-live/nieuws/algemeen/belgen-137-miljard-euro-rijker-in-coronajaar/10298095.html