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How to Address a Negative Net Worth While on Lack Down

Updated on April 19, 2020

Yes, we are currently suffering from a Pandemic and most of the time we are at home due to the lockdowns imposed in our community. Bored? Why not take this time to assess your finances and know your net worth in order to check where you stand financially. This will actually help you adjust your spending once our daily life routine is back to normal again.

So what is net worth? Net worth is actually what you own (assets) minus what you owe (liability). Assets include cash, investments, real estate and other properties, vehicles, retirement savings, and valuables that have significant worth. Liabilities include mortgages, personal loans, student loans, credit card debt, car payments, or any other debt you might have.

What is the advantage of knowing your net worth?

1) Knowing your net worth will help you track your financial progress from time to time;

2) Once you know your net worth, you can easily track where your money is going. If it’s positive, it will give you a head start to make a financial goal while if it’s negative, it will help you adjust your spending habit;

3) It will help you pinpoint problem areas in your finances specially if you end up with a negative net worth. With this, you can also easily come up with a solution on how to address a negative net worth such as paying your debts or earning extra income to balance your finances.

How to compute your net worth?

It is very easy to compute just get a piece of paper then list all your assets this includes savings accounts, checking accounts, cash on hand, value of your real estate property, value of your car, current amount of your investment portfolio, value of your retirement insurance such as life and health insurance and other assets you have that has value. Since most of the amount is an estimation, be careful not to overprice in order to get the most accurate amount of your net worth. Next, list all your liabilities, from car loans, home mortgages, student loans, credit card debts, subscriptions and other debts you have. Then subtract the total amount of your assets to that of the total amount of your liabilities.

You can use the table below to consolidate your assets and liabilities before computing it:

Name of Asset
Name of Liability
Cash on hand
Car Loan
Health Insurance
Credit Card Debt
Grand Total
Grand Total

What now is your net worth?

If it’s positive, congratulations, meaning you are still financially healthy and you are still able to manage your finances pretty well. If it’s negative, believe me the formula is right. If it’s negative it only means that you are spending more money than what you earn. It can also be because you have plenty of loans or debts that you are currently paying, most of the time it is your credit card debts that is making your finances bleed.

How to address a negative net worth while on lockdown:

1) Spend less—Since we can’t go to the malls to shop, it is easier to spend less. Only spend on essentials like food, and do not hoard. Buy only what you can consume for a week or two, think of other people as well, there are those who are in need. You might be buying too much food and eventually ending it in the trash specially for vegetables and fruits. Also, track your everyday spending and review it once a month, check where you spend most and categorize if this is a want or a need. Assess all your “wants” if you can give it up in order to save more money.

2) Pay off your debts—Take a look at all your debts and check all of your bad debts such as credit card debts and loans from other people and start paying them off. You may use the table below to review your debts and to check which debt needs to be paid first:

Interest (if any)
Total (as of today)

A piece of advice when paying your debts, pay the debt that is making you feel anxious and which is not helping you financially and avoid accumulating the same debt in order not to be in the same problem again.

3) Build your savings—just like paying your debt, this is the right time to save. Since most restaurants and coffee shops are closed, start cooking your meal and make your own latte and simply put your lunch and coffee budget to your savings account. Also, if you have a budget for travel and other luxuries, why not cut it for the mean time while there is a lockdown specially since travel of people is restricted, then put your money in your savings account. After the lockdown, you will be amazed as to how much money you are able to save.

4) Earn extra income—there are many ways to earn extra income while on lockdown. One of which is selling things online, start with what you have. If you have plenty of clothes, shoes and bags, why not check which items you can let go and sell them as a bargain online. There are plenty of auction sites where you can sell your items. Another one is writing, consider freelance writing or being an affiliate. If you have talent in writing why not start learning and apply it. You can still keep your day job and use this freelance writing gig to earn extra income.

How often should you assess your net worth?

Most financial advisors advices you to have a financial check-up at least annually but I am more comfortable doing it every semester in order to easily keep track of my finances and not let my finances fall off the wagon. Others do it once a month or once every quarter because it keeps them motivated to work on their goal. Well, how often you do it does not really matter as long as you keep track of your net worth and you set a schedule to review it.


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