Calculate the fairness of someone you don't know

Calculate the fairness of someone you don’t know

Want to know the net worth of a celebrity or someone else you don’t know personally? here is a guide on how to calculate an individual’s net worth.

What is fairness?

Net worth is the value of all non-financial and financial assets held by an institutional unit or sector, less the value of all outstanding liabilities. Simply put, net worth is basically the excess of assets over liabilities. For individuals and businesses, this is the key to assessing their value. Net capital can be applied to businesses, individuals, governments or sectors of the economy.

Your net worth is like a financial snapshot that shows the dollar value of what you have and what you owe. If your assets exceed your liabilities, you have positive equity. On the other hand, if your liabilities exceed your assets, you have negative equity.

But it should be noted that even a person with high net worth can struggle financially. The presence of many assets with low liquidity (inability to immediately convert assets to cash) may mean that there is not enough cash to cover operating expenses in the event of a sudden drop in income, which in itself may present a different set of difficulties.

  • Net worth is calculated as follows: Assets Commitments = Net value

If you have total assets of $ 200,000 and total liabilities of $ 125,000, your net worth is $ 75,000, or ($ 200,000 – $ 125,000). This is the rule of thumb used in calculations, and if you estimate your numbers correctly, your net worth will always be right.

How to calculate the fairness of someone you don’t know

But what if you want to calculate the net worth of someone you don’t know personally, tell a friend; how do you do that Is it even possible ?

Since you need to know the correct value of a person’s assets and liabilities before trying to calculate the exact net worth for him or her, it can be a bit difficult to calculate a person’s net worth than you hardly know.

To get started, you need to know what a person owns, what those assets are worth and what the tax consequences would be if those assets were sold, what assets are hidden, currency fluctuations and much more. But there is a way around this situation. The only way out is if that person provides you with their spreadsheet or gives you the correct value of their assets and liabilities.

Unless you really know the person personally and there is no chance that you can access their spreadsheet and you are not close enough to them to get their information about the asset and the passive and you will have to process the information you collect on them. If the person is a public figure, you can start by defining net worth by analyzing public records, articles, contracts, and videos.

Unless the person is necessarily a celebrity, you can make an educated guess based on their income, age, actual assets, and spending habits. This will give you an average rating. To calculate their net worth, you can start by adding up their assets as you see them. These assets may include

  1. Retirement investments … This will include employer sponsored retirement plans such as 401 (k) and 403B plans, as well as personal retirement assets such as traditional or Roth IRAs or solo 401 (k) s.
  2. The property. This includes the market value of their primary residence, as well as any other property they own, whether for investment or pleasure. You should try to get an overall estimate for this, and websites like Zillow or Redfin can help you with an estimate of the home value that you can use.
  3. Business assets or capital. If someone is a business owner, you can list their business equity or any significant asset that you know they own.
  4. Personal property. These can include cars, furniture, jewelry, and other personal items. Many people do not include them in calculating their home equity, either because they have no intention of selling them or because they have very little resale value. For those you barely know, you may need to focus only on their cars and furniture.
  5. Personal loan receivables. These are loans that have been given to family, friends or businesses. associates. Include them if only you are sure of the amount listed.

The next step is to add up their estimated liabilities. It can be:

  • Mortgage … This includes the first mortgage at their primary place of residence, as well as a second line of credit for a mortgage or home equity, if available. Be sure to include any outstanding mortgages on any investment or leisure property you know of.
  • Installment loans. A car loan comes to mind first, but you should also include all the other terms of the installment loan for things like furniture, boats, or motorcycles.
  • Student loans. Student loans are generally visible to people, so you might know if they still have student loans or not. If you don’t have this information, you can ignore it.
  • Credit card. Credit cards are revolving debt, which means their balances are constantly changing, so you need to be careful when calculating them. But you might not have access to it if you don’t miss it.
  • Business loans. It is very likely that any loan taken out for business purposes is also a personal liability and should be included in the calculation of the NPV. Again, careful research will reveal this information about the person, if it exists.
  • Other obligations. This can include medical debts, tax debts, or any other liability that does not fit into any of the above categories. If the person is a celebrity, you can easily access their posting obligations.

After calculating the liabilities you have, now you need to deduct them from their assets. to get the net worth of the person in question.

You should note that this net worth calculation is by no means accurate as you do not have access to all of their assets and liabilities. This means that your calculations are only a rough estimate which can give you an idea of ​​their true value. This is how people calculate celebrity fortune.