To calculate your net worth, just subtract your liabilities (what you owe) from your assets (what you own).
While the equation is simple, it’s important to get a snapshot of your finances and understand where you are on the path to achieving your financial goals.
First, assets
Your assets are the things you own. They are items of value, as well as items that can potentially provide income down the road. These include:
- Cash: Money on hand at financial institutions. Count all the money you have in your checking and savings accounts plus any certificates of deposits you may have.
- Real Estate: Add the current market value of your home, as well as the rental or other properties you own.
- Home Furnishings: Electronics, couches, tables, chairs, bedroom sets, etc.
- Vehicles: Add the present value of all your vehicles, including cars, boats, motorcycles, etc. To help get an estimated value, visit Kelly Blue Book, NADA, or Edmunds online.
- Investment accounts: Balances of your current brokerage and IRA account.
- Retirement accounts: 401(k) and IRAs, pensions, Thrift Savings Plan, etc.
- Whole life insurance policies with cash value.
- Jewelry and antiques: Anything of substantial value should be included.
Liabilities
Liabilities represent what you owe to others. They should be added and subtracted from your assets.
- Mortgages: Outstanding balances on all your property loans, including what you owe on the mortgage on your primary residence, home equity loans, as well as what you owe on rental properties.
- Vehicle loans: Any money you owe on a car, boat, or other vehicles.
- Credit card debt: Total all your credit card balances.
- Personal loans: Any loan you have an online lender, payday lender, bank, or other financial institution.
- Student loans: Everything you owe on private and federal student loans.
- Medical debt: Unpaid medical bills, or a payment plan for medical bills — even if you aren’t paying interest.
- Back taxes and liens: If you owe back taxes, have a payment plan with the IRS, or have a lien against any of your property, those amounts should be considered liabilities.
Hopefully when you add everything up and subtract liabilities from assets you have a positive number, reflecting a positive net worth.
If you end up with a negative net worth, your goal should be to pay down debt and boost savings to help you bring your net worth above zero.
