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Personal Finance

How To Calculate Your Net Worth

September 10, 2019


Keeping a pulse on your overall financial health is important to stay on track with your goals. Calculating your net worth is a great way to get a snapshot of where your overall finances stand.

What is Net Worth?

To put it simply, your net worth is the sum of all your financials assets (everything you own) minus the sum of all your debt or liabilities (everything you owe). 

Your financial assets may include:

  • Cash in checking and savings accounts
  • Real estate property, if you own a home or rental property
  • Investments such as 401(k) plans, Individual Retirement Account (IRA) or other investments through brokerage accounts
  • Other assets of significant value (cars, jewelry, artwork, etc.)

Your debt (liabilities) may include:

  • Student loans
  • Home mortgage
  • Car loan
  • Credit card debt

How to Calculate My Net Worth

If you’re looking to track progress over time, the best way to calculate is to keep a spreadsheet that you can update on a regular basis. 

  1. Start by making a list of all your assets and liabilities 
  2. Collect all the numbers from your bank accounts, loan originator, appraisals, brokerage accounts, etc.
  3. Add up all your assets in one column and all your liabilities in another
  4. Subtract the sum of all your liabilities from the sum of all your assets

There are some pre-built templates you can use like this free Microsoft Excel Net Worth Calculator sheet, which automatically calculates your total net worth based on your entries. You can easily add or remove line items based on your needs. 

Why should you care about your net worth?

The main objective of calculating your net worth is to keep track of how you are progressing toward your financial goals. Since net worth is a high-level metric, it makes sense to calculate it at least once every three months to evaluate how you are doing against your goals. 

If you find that you’re not growing your net worth as quickly as you’d like, you can then make adjustments to your budgeting or investment portfolio. 

What if your net worth is negative?

Your net worth can be negative if you have more debt/loans than assets. For example, if you had $5,000 in your checking and savings account, but $7,000 in credit card debt, your net worth would be -$2,000.

You might be starting off with a negative net worth out of college or if you take a loan to buy your first home. Ideally, you’ll be building your assets over time as you repay debt, contribute to retirement plans and invest your savings.

The key to turning your net worth from positive to negative is to:

  1. Regularly pay off portions of your debt. Credit card and loan interest rates build up quickly and if you don’t pay them on time, you could quickly be stuck paying interest dues each month instead of the principal of your debt.
  2. Save regularly and invest your savings into assets that will grow your portfolio over time, such as stock, bonds, or real estate investment trusts.
  3. Consider supplementing your income with side gigs.

How Does Your Net Worth Compare?

The Federal Reserve Consumer Finance Survey of 2016 found that the average U.S. family net worth is approximately $689,500. However, there is an ultra-rich segment of the population bringing this average up.

To get a better picture, we can look at the median net worth, which shows the middle point where 50% of households have more and 50% have less. The median net worth of U.S. families in 2016 was approximately $97,000. 

Average Family Net Worth in the United States between 1989 and 2016 (in thousand U.S. dollars)

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