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How to Calculate Your Net Worth in Four Easy Steps

by Jeremy Holcombe

Your net worth is a very important aspect of your overall financial situation. Your net worth will play a huge part when it comes to things like applying for loans, obtaining credit, calculating interest rates and more. Many of us don’t know how to calculate out net worth. Don’t worry; the process isn’t a difficult one. Use the four simple steps below to calculate your net worth.

Calculating Your Net Worth

Step 1: List Out Your Largest Assets

Get the process started by listing out all of your largest assets. This will include things like your home, your car, maybe a boat…. things like that. If you have other large assets, go ahead and add them to this list.

Step 2: Gather Up Your Financial Statements

Gather up all of your latest financial statements. This will include statements that detail the value of your more liquid assets. These types of assets include checking and savings accounts, cash, CDs or other investments such as retirement accounts, stocks, bonds, etc. Anything that is valuable will help increase your net worth.

Step 3: List Personal Items That Have Value

This can get a little muddled. Sometimes people want to list personal items that are not actually worth that much, or may have more sentimental value than anything else. A good rule of thumb to follow here is to list things that are only worth $500 or more. This can include jewelry, coin collections, musical instruments, collectibles, and more. You don’t need to itemize all of this, simply make a list.

Step 4: The Formula

Take all of the assets you have listed from the first three steps and add them together. This number represents your “total assets.”  This number is what you are worth personally if you owe nothing to anyone, which is probably not the case — but the number is fun to look at. Now you have to start subtracting from that number to find out your true net worth.

Add together all of the outstanding debts and other liabilities you may be responsible for. These will include house payment, car payments, loans, credit cards, school loans… anything you make a payment on needs to be added into this list.

Once you have your list, and your total number of debt and liabilities added up, you will simply take that number and subtract it from the  “total assets” number above. The amount you come out with will be your “net worth.”

You may be alarmed at what you see, and you may even come out in the red — but don’t be alarmed. Use this as motivation to build your net worth up and get things paid off.

Perform this process once a year to see if you are making any progress in the financial area of your life.

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