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

One of the challenges of calculating your net worth is assigning realistic values to all your assets. It's important to make conservative estimates when valuing assets, especially tangibles like jewelry) to avoid inflating your net worth – otherwise you’ll end up with an unrealistically optimistic view of your wealth. While some assets are easy to value (like cash and CDs), others, such as your home and antique collection, can get a bit trickier. Here are some guidelines.

Automobiles

Use the Kelley Blue Book or NADA Official Used Car Guide to find out how much your car is worth. To do so, you’ll need to know your car's make, model, year, mileage and any options (such as a navigation system). Book values change frequently, so you’ll probably need to update this value each time you calculate your net worth to keep the figure accurate.

Collectibles

Use the estimated market value for collectibles like stamps, coins, jewelry, fine art, sports cards and your Star Wars figures (you’ve hit the jackpot if you have a rocket-firing Boba Fett or vinyl Jawa). Price guide books are available in stores and online, or you can take your item to an appraiser – just be sure to use one who knows something about your items (don’t take your Star Wars toys to a stamp appraiser). If you have valuable collectibles, ask you home insurer if scheduled personal property coverage would be a good idea. (For more, read Contemplating Collectible Investments.)

Home

It’s important to use the actual current value of your home rather than what it used to be worth, or what you wish it were worth. Since your home is probably your single largest asset, this figure plays an important role in achieving an accurate net worth figure. To determine your home's current value, research how much similar homes in the area have sold for recently, or ask a real estate agent to provide an estimate (they’ll probably use the sales comparison approach). If you want to get really accurate, deduct 6% from your home's value to represent the real estate commission you would pay to sell the home.

Household Furnishings

It’s not practical to add up the value of everything in your house. Focus on items that would have resale value, such as furniture, appliances, china, silver and jewelry, and find out the fair market value. Higher ticket items usually need an appraisal. Keep in mind, Millennials are the largest generation in the U.S. now, and they reputedly don’t care about old stuff like china and antiques. That means it will likely be harder to find a buyer – especially one who’s willing to pay you what you want. Keep that in mind when you’re estimating values. (To learn more, see Money Habits of the Millennials.)

Life Insurance and Annuities

Include the cash surrender value of your life insurance policy as an asset in your net worth calculation. This is the money your insurance company pays if you voluntarily terminate your policy before its maturity (or before the insured event occurs). The cash surrender value applies to the savings element of whole life insurance policies that are payable prior to death. To determine your policy's cash surrender value, contact your insurance agent or review your policy for information. You can also include the cash surrender value of any annuities as well. (For more, see Cashing in Your Life Insurance Policy.)

Pensions and Profit-Sharing Plans

The current value of your pension and profit-sharing plans are considered assets on your net worth statement. It can be challenging to put a present-day dollar value on future income; however, for the purpose of your net worth statement, include the amount that you could withdraw from the plan if you quit your job today. Your company’s personnel department can provide you with the figure. For other retirement plans, such as IRAs and 401(k)s, just list the current balance.

Debts

Figuring out your debts is usually pretty straightforward since you probably receive monthly statements for any outstanding debt. These statements are based on actual numbers – not estimates – and show exactly what you owe. Some statements, such as for credit cards, do provide an estimate of how much it would cost to pay off the debt over time, including interest charges.

Inheritance

It would be nice to include your future inheritance to boost your net worth. Don't do it. The inheritance you are expecting is just that – an expectation, not a certainty. You can’t count it as an asset until you are in possession of the assets – whether the inheritance comes as cash, real estate or stocks. Until then, it’s not yours. There are several reasons why you shouldn't plan on receiving an inheritance:

  • Your parents and grandparents might still be recovering from the Great Recession.
  • People are living longer and spending more of their savings.
  • More adults are providing financial support to their grown children (which leaves less money to give).

Even if you’ve been told you’ll receive a certain amount as an inheritance, don't count on the money or include it in your net worth statement until it's actually there. A lot of things can change between now and then.


Calculating Your Net Worth: Calculating Your Net Worth
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