Calculating Your Net Worth: A Step-by-Step Guide
My current net worth is $70,000, and I’m determined to increase it to $100,000 by the time I turn 30. But before diving into how I plan to achieve that, let’s talk about how to calculate your net worth.
What is Net Worth?
First, it’s important to remember that your financial net worth does not define your personal value. You are so much more than numbers on a balance sheet. That said, understanding your net worth is a key part of managing your finances, and it can be a fun and motivating exercise.
Step 1: Total Your Assets
Start by listing all of your assets. These are items of value that you own, including:
Cash: Include all the money you have on hand or in your bank accounts, including savings.
Investments: Add the current value of any retirement accounts (like 401(k)s or IRAs), stocks, bonds, employee stock programs, or 529 plans.
Property: Include the current market value of any real estate or personal property you own. This includes homes, cars, or other valuable possessions.
For example, I included my house, which had a recent appraisal to remove PMI (Private Mortgage Insurance) from my mortgage payments. If you haven’t had an appraisal recently, you can use tools like Zillow to estimate the value based on similar properties in your area. I also added the value of my cars, which, although they’re not worth much after years of use, still contribute to my total assets. Even if your vehicles are older, consider adding a scrap value if you were to sell them.
Once you’ve listed everything, total up these figures to get your total assets.
Step 2: List Your Liabilities
Next, you need to account for your liabilities. These are the debts and financial obligations you owe, such as:
Loans: Include any student loans, car loans, or personal loans.
Mortgage: Add the remaining balance on your mortgage.
Outstanding Bills: If you have any unpaid bills or credit card debt, include those amounts as well.
For me, the primary liabilities are my student loans and mortgage. We pay off our credit cards every two weeks when we get paid, so those don’t add to our liabilities. Fortunately, we don’t have any other significant outstanding bills.
Add up these liabilities to get your total.
Step 3: Calculate Your Net Worth
Now, subtract your total liabilities from your total assets. The result is your net worth.
For example, after totaling my assets and subtracting my liabilities, my net worth currently stands at over $70,000.
What’s Next?
If you’re interested in following along on my journey to grow this $70,000 into $100,000 in the next 18 months, stay tuned! I’ll be sharing the strategies and steps I’m taking to reach this goal. Whether you’re starting out or working towards your next financial milestone, knowing your net worth is an important step in understanding your financial health and setting achievable goals for the future.
