How to Calculate Net Worth
Net worth is a key concept of personal finance. It’s the economic value created when subtracting liabilities from assets. Determining net worth can help measure your financial progress over time. The more you save, the greater your net worth will be.
Your net worth will change over time as debt, liabilities and assets fluctuate. However, the goal is to always have or be working towards a positive net worth. Calculating net worth takes just a few steps.
Why Do I Need to Know My Net Worth?
Before you learn how to calculate your net worth, you might want to know more about why you need to do it. Net worth is all about the big picture. It helps provide a sense of the overall state of your finances. Having that perspective can help guide your goals and decisions.
Knowing your net worth can be a great motivator to tackle debt. Whether it’s finishing off a mortgage, eliminating credit card debt, or starting again after bankruptcy, reaching a positive net worth is a great feeling and accomplishment.
Calculating Net Worth
Calculate your net worth by subtracting your liabilities from your assets. Liabilities include major expenses and debt such as:
- Medical Bills
- Child Support Owed
- Credit Card Debt
Assets may include:
- Furniture, Jewelry and Art
- Cash Value of Life Insurance
- Market Value of Home
Once you have all your assets and liabilities filled out on the paper or in the Excel sheet, subtract them to get your net worth.
A negative net worth isn’t necessarily a bad thing if you have “good” debts, like a mortgage, business loans, or student loans. Continue saving and working toward a positive net worth. If your debts are from credit cards, multiple car loans and taxes owed, you may need additional help managing your budget and finances.
To speak to a credit counselor today about budgeting and managing your finances, call 800-769-3571.