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

    The Importance Of Knowing Your Net Worth

    It is vital that you track your net worth no matter what your age.
  2. Managing Wealth

    Assets That Increase Your Net Worth

    Your home, properties and vehicles can all increase your net worth.
  3. Personal Finance

    Why You Should Know Your Net Worth In Your 20s

    Even if you are just entering the workforce and haven't had time to save or invest, you still need to be aware how much you're worth.
  4. 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.
  5. Retirement

    Why You Should Know Your Net Worth In Retirement

    Just because you are comfortably in retirement, that doesn't mean you should stop keeping track of your net worth.
  6. Personal Finance

    Common Liabilities That Hurt Your Net Worth

    Every penny that you keep out of the liability side of the net worth equation essentially ends up on the asset side.
  7. 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.
Frequently Asked Questions
  1. Why Do Most of My Mortgage Payments Start Out as Interest?

    Fear not: Over the life of the mortgage, the portions of interest to principal will change.
  2. What is the difference between secured and unsecured debts?

    The differences between secured and unsecured debt, and how banks buffer risks associated with each type of loan through ...
  3. How Many Times has Warren Buffett Been Married?

    Warren Buffett has been married twice in his life, but the circumstances surrounding the marriages were unconventional.
  4. What's the smallest number of shares of stock that I can buy?

    Many people would say the smallest number of shares an investor can purchase is one, but the real answer is not as straightforward. ...
Trading Center