It is important to understand your cash flow. Assets are possessions that have the potential or are worth a large sum of money. Liabilities are debts. Cash flow is the cash you have on hand.
If you are going to start a business and you have assets that are worth a large sum of money with no cash flow you will have to borrow off the equity you’re making on your mortgage in order to make large purchases or buy inventory. Not to mention any mortgages or debts that you currently have. For a lot of small businesses, if cash flow isn’t available, the owners often turn to borrow on their current assets. If the business goes under and doesn’t make it (which 82% of small businesses fail) the owners end up losing their personal assets.
To determine your net worth calculate your total assets and subtract that number from your total liability. To get an idea of how much your assets are worth, you must get an appraisal done. Appraisals are not free but they are an accurate way to judge how much money you could potentially sell your assets for.
Property value can be determined by the amount of money that the last property in the neighborhood vicinity of your home or business was sold for. If the property resembles yours in esthetics and size it is likely that your property can be sold for the same amount or higher depending on the real estate market rate. This approach is not as accurate as appraisals but it can give you an idea of what your property is worth.
Other assets like fine jewelry and cars also count towards your net worth. Jewelry can be appraised by a jeweler that specializes in appraisals. Pawnshops can tell you how much any small vehicles like ATVs or even riding lawn mowers are worth. There are also collectors that specialize in coins and rare items that can be contacted for appraisals. When calculating your worth appraise everything you deem valuable.
If you’ve made an investment into a business venture gone wrong you can pursue compensation for investment losses through The Financial Industry Regulatory Authority (FINRA). If you choose this route you’ll need a FINRA arbitration lawyer with experience in order to win your case. The compensation from these cases is counted as assets.
Liabilities are debts like mortgages, loans, and credit card debt. After an appraisal is done on your assets subtract your debts to calculate the surplus. Student debt is a liability that is often overlooked. Income tax debt is also a liability, if you owe a debt to the IRS you must subtract that debt from your total asset value as well as all other debts owed.
Determining your cash flow involves adding any available funds you have in accounts, digitally and on hand. Determining your cash flow can be complicated, but there are digital cash flow experts that perform consultations to help properly evaluate your cash flow or help you get on the right track to obtaining more cash flow by limiting your spending and costs.
It is important to know your cash flow situation especially if you are looking to open a business. Determining your net worth can benefit you by adding to your cash flow if you need financial assistance in a business matter. If you’re going to create a will and you have more than one beneficiary knowing your net worth and cash flow will help in determining how to divide your assets. Don’t wait to determine your net worth, life happens and you may not get the time or chance later on.