The thing about valuing assets is that we are bound to miss a lot of stuff most of the time.
Sometimes, we simply forget to factor in certain valuables in our possession. Other times, we’re just unaware of their potential value.
What you need is a systematic process for evaluating the market value of your possessions at any point in time. Remember that not all assets are tangible. You’ll also have to factor in any liabilities, such as outstanding loans or credit card debt.
When you’re calculating your net worth on a balance sheet, you have to take into account all these different factors to value each and every asset you own. This can range from tangible assets like real estate and antique items to intangible things like intellectual property.
In this guide to asset valuation, learn everything you need to know to find out the monetary value of your assets and track your net worth with ease. We’ll walk you through the exact steps you need to follow to compute your assets value.
What Defines an Asset?
What is an asset, really? Simply put, it’s an item of monetary value that you possess and own.
There are a number of reasons why you should be keeping track of your asset values. It helps you keep track of your net worth, make better decisions regarding your finances, and improve your eligibility for getting loans from banks.
Of course, not all assets are the same and not all of them are valued in the same way.
For example, the price of real estate may compound over time, whereas electronic items tend to depreciate in value. Similarly, the way you’d calculate the value of your antiques and other collectible investments is very different from how you’d evaluate your intellectual property.
Steps for Calculating Asset Values
Ready to calculate your asset worth? Here’s an overview of the steps you’d need to take to figure out asset values and calculate your net worth from scratch.
Catalog Your Assets
The definition of a financial asset is a broad one. There are lots of different things that can add monetary value to an individual’s possessions, and each of them needs to be cataloged separately.
Of course, it’s impossible to make an exhaustive list of everything you own. But you should try to account for anything of monetary value significant enough that it can impact your net worth.
Here are some categories of assets you should consider taking into account:
- Tangible assets
- Intangible assets (like digital assets)
- Fixed assets
- Liquid assets
- Operating assets
- Non-operating assets
- Current assets
- Company’s assets
You can either list your assets by hand or use a spreadsheet.
Define Asset Values
Once you’ve made a list of all your current assets, the next step is to start appraising their value one by one.
Different types of assets also need to be valued in different ways.
For example, the way you’d calculate the value of real estate is very different from how you’d evaluate stock price. Here are a few ways you can calculate asset values for different types of items:
- Income Flow: Determine the value of your assets based on the amount of cash flow they bring in on a regular basis. This method is often used to evaluate intangible assets like professional skills and tangible assets like factory machinery.
- Market Value: What’s the market price of your asset at the time of valuation? This method is ideal for calculating the value of long-term assets like land or buildings.
- Depreciation Cost: Certain assets compound over time, while others depreciate. Electronic goods are a great example of assets that decrease in value over time, making it necessary to subtract depreciation costs while determining their current value.
- Discounted Flow: You can also calculate the future value of your assets by taking their current value into account and subtracting any potential risks from their current worth.
- Book Value: The book value of an asset is equal to its worth at the time of purchase minus any appropriate cost of depreciation. This is the favored method for calculating asset values for taxation purposes.
- Expected Flow: This method forecasts the future cash flow from an asset and brings it down to present value by discounting a reasonable interest rate from it. It’s the preferred method used by companies for investment appraisal.
Calculate All Liabilities
When figuring out your net worth and the gross value of your assets, it’s also important to take your liabilities into account.
Liabilities are defined as financial obligations or debt owed. This can include loans you’ve taken out from various banks, outstanding credit card debt, and monthly installments payable against advanced consumer goods purchases.
Any liabilities that you must pay off within a period of one year are called current liabilities, while others fall in the category of long-term liabilities.
Make a separate list of all your liabilities, and make sure to account for any interests payable on top of them over the entire period of repayment. This is very important for calculating the true value of your net assets.
Prepare a Balance Sheet
A balance sheet is a financial statement in the form of a spreadsheet that aggregates all your capital, assets, and liabilities in one place. It’s extremely useful for figuring out the current state of your finances — both for personal reference and official reasons.
Every balance sheet has to have a reporting date and is only applicable to a specific period, with the reporting date usually being the last day of the accounting period. Your assets and liabilities are all displayed in the spreadsheet, sorted into appropriate categories with the right financial value.
Balance sheets are useful for individuals and businesses alike. They provide a glimpse into your financial situation, which is used to offer insights regarding performance and potential. However, they lose their value quickly when not kept up to date — a manual task that may get overwhelming depending on your level of portfolio diversification.
Or, Use Financial Software
If you’re intimidated by the thought of developing a balance sheet from scratch, you’re not alone. It can be grueling work.
This is why there are a number of financial tools that can help you keep track of your finances on a regular basis to make appraising asset values a whole lot easier.
In fact, Kubera’s personal balance sheet platform was created just to modernize and automate this process.
Balance sheet software like Kubera works by aggregating all your assets and liabilities from different sources — such as bank accounts, investment portfolios, and loan statements. Then, where it can, it automatically tracks the rise and fall in asset values. This helping hand makes asset value calculations and tracking much more accurate and manageable.
Intrigued? Let’s dive deeper into this software option.
Kubera: The Best Tool to Find and Track Asset Value and Net Worth
Kubera is a personal accounting and finance app that serves as a balance sheet for automatically keeping track of your assets and expenses electronically.
But what makes it the best tool in its category?
Kubera is built from the ground up for global citizens. It works without geographical restrictions, automatically integrating your asset values irrespective of where they are located.
It also supports the broadest range of currencies, asset types, and investment classes — traditional and alternative investments alike — which makes it perfect for people with a diverse financial portfolio spanning multiple currencies and locations. Just check out the growing list of financial institutions we work with!
Financial information is always sensitive, which is why we take also extra security precautions to make sure your data doesn’t fall into the wrong hands. Kubera doesn’t offer up your data to third parties or sell it to companies for marketing purposes.
But when you do want your portfolio as well as your estate plans to fall into the right hands — our beneficiary management feature makes it easy to pass your data on to your chosen heir.
And don't worry — if you work with a wealth manager or accounting professional, you can still use Kubera! Just have them take advantage of our white-labeled solution to serve up financial information in an accessible manner to their clients (that’s you!)..
Want to see how Kubera can help you find and keep track of your asset values automagically? Sign up and try us out.