What gets measured gets improved.” This age-old adage holds true for your finances. Knowing where you stand financially is the first step towards reaching your goals. Regularly tracking your net worth helps you stay on track and provides motivation as you see your progress!
Calculating your net worth is a straightforward process. It involves determining the difference between your total assets and liabilities. Your net worth represents the value of what you own (assets) minus what you owe (liabilities). You can use our Net Worth Tracker. Here’s how to calculate it:
1. List Your Assets: Make a comprehensive list of all your assets. This includes items such as cash and cash equivalents (savings accounts, checking accounts, cash on hand)
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- Investments (stocks, bonds, mutual funds, retirement accounts)
- Real estate (primary residence, rental properties, land)
- Vehicles (cars, motorcycles, boats)
- Personal property (jewelry, artwork, collectibles)
- Other assets (business interests, intellectual property)
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2. Assign Values to Your Assets: Determine the current market value of each asset. For items like cash and investments, this value is straightforward. For real estate and personal property, you may need to research comparable sales with online tools, such as Zillow, or obtain professional appraisals to estimate their value accurately. You can use Kelly Blue Book to get an approximate value for vehicles.
3. Total Your Assets: Add up the values of all your assets to calculate your total asset value.
4. List Your Liabilities: Make a list of all your liabilities or debts. This includes items such as:
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- Mortgage(s)
- Auto loans
- Student loans
- Credit card balances
- Personal loans
- Other debts (medical bills, outstanding taxes.
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5. Determine the Outstanding Balance for Each Liability: Note it’s the remaining balance owed on each debt (not the original amount borrowed).
6. Total Your Liabilities: Add up the balances of all your liabilities to calculate your total liability value.
7. Calculate Your Net Worth: Subtract your total liabilities from your total assets. The formula is Net Worth = Total Assets—Total Liabilities.
8. Review and Interpret Your Net Worth: Your net worth can be positive, negative, or zero.
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- A positive net worth indicates that your assets exceed your liabilities, reflecting financial stability and wealth.
- A negative net worth indicates that your liabilities exceed your assets, suggesting debt or financial challenges that must be addressed.
- A net worth of zero means that your assets and liabilities are equal.
- Improve your Net Worth: You can improve your financial wellness by paying down your liabilities, increasing your assets, or both.
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Again, calculating your net worth doesn’t need to be complicated. You can use our net worth tracker by hand. Otherwise, there are numerous apps available to help you track your net worth and budgeting. One such app that I use and recommend is Monarch Money.
Regularly updating your net worth can help you track your financial progress over time and make informed decisions about budgeting, saving, investing, and debt management. If you want to improve your financial wellness, I recommend calculating it at least once a year. More often, if you’re actively working to improve your net worth.
In my coaching program, we track this and many other metrics to ensure you hit your financial goals. If you’re interested in learning more or have any questions, don’t hesitate to reach out.
Remember, taking the first step towards understanding and improving your net worth is a significant achievement in itself!
