1. Calculating Your Net Worth: Introduction
  2. Calculating Your Net Worth: Important Terms
  3. Calculating Your Net Worth: Why Net Worth Is Important
  4. Calculating Your Net Worth: Making Accurate Estimates
  5. Calculating Your Net Worth: Calculating Your Net Worth
  6. Calculating Your Net Worth: What Your Net Worth Means
  7. Calculating Your Net Worth: Building Your Net Worth
  8. Calculating Your Net Worth: Conclusion

Your net worth is the difference between what you own and what you owe – your assets minus your debts. Assets include things like cash, investments, your house, cars and anything else of value, such as antiques and art collections. Debts are what you owe on those assets and other purchases, such as your outstanding mortgage, car and student loans, as well as credit card debt.

Your net worth lets you see where you are, financially speaking, at this point in time – it’s a snapshot of your financial health today. What makes net worth so valuable, however, is when you track it over time to see trends in your finances and identify where you’re doing well – and where you could do better. Ideally, your net worth will grow over time as you earn more money and pay down debt.

While younger people tend to have a lower net worth – most have a limited number of earnings years coupled with lots of debt, after all – anyone can have a negative net worth, where you owe more than you own. In fact, a report from the Federal Reserve Bank of New York found that 16.6 million U.S. households have a negative net worth. The biggest culprit? Student loan debt. A negative net worth can be emotionally and financially painful, but it doesn’t necessarily mean you’ve been irresponsible with your money. It does point out, however, that you need to act now to get your finances on track.

There are lots of online calculators (including Investopedia’s Net Worth Calculator) and apps that can help you measure your net worth. Of course, you can figure out your net worth the old-fashioned way, with pencil and paper or an Excel spreadsheet. Even if you decide to use an online tool or app, it’s helpful to at least know how to calculate net worth on your own. That way, you get the most out of the numbers, understand why they’re important and see first-hand how keeping track of net worth can help you achieve your financial goals. To help you get started, here’s a step-by-step guide to calculating your net worth.

 


Calculating Your Net Worth: Important Terms
Related Articles
  1. Investing

    Why Knowing Your Net Worth Is Important

    Regardless of your financial situation, knowing your net worth can help you evaluate your current financial health and plan for your financial future.
  2. Personal Finance

    What's Your Net Worth Telling You?

    Net worth provides a road map for retirement - learn if you're headed in the right direction.
  3. Personal Finance

    Students: Don't Be Afraid Of Your Net Worth

    Even if you are a student and aren't earning income, you still need to be aware of your net worth.
  4. Personal Finance

    2 Statements to Help You Understand Your Finances

    A balance sheet and cash flow statement will help you understand where you stand financially.
  5. Retirement

    Are You On Track To Hit Your Desired Net Worth By Retirement?

    Here are some calculations to determine if your net worth is what it should be at your age.
  6. Investing

    What is Net Worth?

    Net worth is the amount by which assets exceed liabilities. Another way to say this is, it's the value of everything you own, minus all your debts.
  7. Managing Wealth

    5 Articles to Refresh Your Financial Literacy

    Being smart about things financial can make the difference between a shaky future and a comfortable one. This quintet of stories elaborates.
Trading Center