How to Determine Your Net Worth

How much are you worth? You might have never thought about that question before because, after all, you’re not rich and it doesn’t really matter, right?

Actually, it does.

If you ever apply for a loan, banks will often look at your net worth and determine whether or not you qualify for the loan based on your net worth. Also, it’s a good idea to know how much you’re worth on general principle.

Here’s how you can calculate your net worth.

Calculate the Value of Your Assets

Your net worth is defined by the value of your assets minus the value of your liabilities. So, to calculate your net worth, you need to add up the value of all your assets.

Your assets consist of everything that you own. That includes real estate, vehicles, furniture, clothing, and everything in the attic. Add up the value of all of those assets.

Remember, though, that you also have financial assets. The money in your checking account and savings account also count as assets. So, you’ll need to include those as well.

Additionally, your other savings and brokerage accounts count as assets. If you have a 401k or an IRA account, those are assets to include when calculating your net worth. Also, if you have a stock trading account on a platform like eTrade and you own Disney stocks or some other stocks, the value of those accounts also contribute to the value of your assets.

It’s also often the case that the value of your life insurance counts as an asset. However, that is the only insurance that’s typically considered an asset. Your health insurance and catastrophic insurance aren’t usually considered assets.

Tally up the value of all your assets. That’s the number you’ll subtract your liabilities from to get your net worth.

Adding up Your Liabilities

Your liabilities are basically your debts. To calculate your net worth, you’ll need to tally all of your debts.

For starters, add up any mortgages you have. That includes first and second mortgages as well as mortgages on properties that aren’t your primary residence.

Next, add up any other loans you have. You might have business loans, auto loans, or personal loans. Those count towards your liabilities as well.

Finally, add up the balance on all your credit cards and home equity lines of credit.

Once you’ve tallied up the value of all your liabilities, you’re ready to calculate your net worth.

Calculating Your Net Worth

It’s just simple math at this point. You have the value of your assets and the value of your liabilities. Now, subtract the value of the liabilities from the value of the assets. That number is your net worth.

If the number is negative, you might think that you made a mistake. In fact, your net worth can be negative, but that’s not a good situation to find yourself. It’s best to keep your net worth positive.

Keep in mind also that with investment accounts, your net worth can change every day as the value of your stocks goes up and down.

You want to make sure that your financial house is in order. To that end, keep up with your net worth. It literally tells you how much you’re worth.