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How to Calculate Net Worth

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How much are you worth, financially? Many people have no idea what their net worth is, although they often read about the net worth of famous people and rich business owners. Your own net worth is a good number to know, though. It can help you understand your overall financial situation and help you set goals for the future.

Make a List of All the Things You Own

Everything you own – that is, your assets – are the place to start. You want to estimate the value of each item and add them up. Don't worry if you still owe money on these items. That will be handled later. Instead, simply find the value of each asset and list it.

Assets include:

Money in your bank accounts, including the current balance of the account you use daily
Value of investments, including 401k, IRAs, stocks, bonds, and CDs
Your car
The market value of your home and any other property you own
The value of businesses interests
Personal valuables including art, jewelry, antiques, and more
Cash value of your insurance policies

Once you have this list, you can put the total down as your assets.

Make a List of What You Owe

Once you know your assets, it's time to total up your liabilities. That is, how much do you owe to others?

Here are some things that can be a part of your liabilities list:

Mortgage
Car loans
Student loans
Credit card and personal debt
Other liabilities or debts you owe

This total of this list you can write down as your liabilities.

Subtract Your Liabilities From Assets

The final step is to simply subtract your liabilities from your assets. If this number is positive, you have a positive net worth. You own more than you owe to others. On the other hand, if it's negative, you owe people more than you own. If this is the case for you, you may want to prioritize paying down debt and saving money for the future.

Consider a Net Worth Calculator to Project Future Net Worth

There are a variety of net worth calculators online, such as the one at Bankrate.com. These allow you to enter your assets and liabilities and include the growth rates of each. Assets grow when you have an appreciation, like when your home or investment accounts increase in value. Liabilities grow when interest is added and the payments made are not enough to make up for it. Liabilities may also grow if you borrow more money.

Whether you figure your net worth manually or work it out using an online calculator, this number can help you plan for the future. Remember, it's just money, but you can use it as a benchmark for budgeting and more.