How to calculate your net worth so you can track your financial progress

Westend61/GettyCalculating net worth is simple.
  • Calculating your net worth is simple, and it can be a great tool to track your financial progress.
  • Your net worth is equal to your assets (what you own) minus your liabilities (what you owe).
  • Importantly, your income has little to do with your net worth – it’s about how much you keep, not how much you make.
  • Your net worth today is a snapshot in time. As you pay down debt or save more, that number will continue to rise.
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Financially speaking, everyone has a net worth. It’s what you’re left with after subtracting your liabilities (what you owe) from your assets (what you own).

Not to be confused with income – that’s what you earn from your job and what’s reported on an income-tax return – your net worth is a single figure that represents your financial standing. It can be negative or positive, large or small. While a $US1 million net worth is often coveted in popular culture, there’s no “right” number. Many people’s net worth increases with age, though.

Importantly, a high income doesn’t necessarily translate to a high net worth, which is why the latter is often a better benchmark for measuring wealth. As of 2016, the typical American family had a net worth of $US97,290.

Here’s how to calculate yours:

How to calculate net worth

1. List your assets

First you need to list out everything you own that has substantial value. While this does include some intangible assets like your investment accounts, it does not include your salary. Your income is part of your cash flow, not your net worth.

Here’s what you should include:

  • Modes of transportation, including cars, motorcycles, and boats (note that there is a more complicated calculation to determine the actual value of depreciating assets like these, but we won’t get into it for the sake of this example)
  • The market value of your home, if you own it
  • The cash value of a permanent life insurance policy
  • The balance of any retirement accounts
  • The balance of any taxable investment accounts
  • The balance of any savings accounts
  • The balance of any checking accounts

Some things you may consider including:

  • The cash value of any expensive jewellery, fine art, furniture, or clothing
  • Business interests

2. List your debts

Your debt is what you owe to creditors or lenders.

Here’s what you should include:

  • The balance of any mortgage(s)
  • The total balance on any student loans
  • The balance of an auto loan
  • The balance of a personal loan
  • The balance of a business loan
  • The outstanding balance on any credit cards
  • Any outstanding tax liability

3. Subtract your liabilities from your assets

After tallying up the above figures, you’ll need to subtract your liabilities from your assets. The number you’re left with is your net worth.

But remember that net worth is a snapshot in time. If you’re regularly making debt payments, or saving automatically in your 401(k), for example, your net worth will rise over time. On the flip side, if you take out a new loan or rack up a big credit-card bill, your net worth may fall. You can use an online tool like Personal Capital to link up all your accounts and automatically update your net worth and track it over time.

Net worth isn’t the be-all and end-all when it comes to financial health, but it can be a simple and valuable tool for tracking progress toward your financial goals.

Personal Capital can help you calculate and track your net worth ยป

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