Calculate Net Worth in 3 Simple Steps
With this article, we give you an immediate promotion—regardless of whether your employer or anyone else recognizes how valuable you are. We hereby promote you to the coveted position of chief executive officer (CEO) of your financial life. Don’t worry—this transition is painless. Your first task is to determine your bottom line or net worth. After all, you need to know money-wise whether you’re in the black or in the red. It is only then that you can determine whether your financial life, like any other company, needs to be turned around. Or perhaps it simply needs to be gently tweaked to generate more positive numbers. Your assets minus your liabilities equals your net worth. We can show you how to calculate your net worth in 3 simple steps, using the worksheet in Table 1.
Round Up Your Assets
First, working with Table 1 or a similar worksheet, enter or write down all your assets, which include all your money and the value of things you own. Be sure to include the values of cash in your bank accounts. Don’t forget any money under your mattress. Include investments in stocks and bonds; real estate holdings; ownership in a private business; retirement savings accounts such as IRAs, 401(k)s, SIMPLE plans, SEPs, Keoghs, or pension plans; annuities; the cash value of your life insurance; and the value of your car, home, jewelry, and other property.
Table 1
| Asset | Value |
| Checking account(s) | $ |
| Other bank savings accounts | $ |
| Mutual funds, stocks, and bonds | $ |
| Real estate other than home | $ |
| Private business | $ |
| Life insurance cash value | $ |
| Retirement accounts | $ |
| Annuities | $ |
| Your home | $ |
| Auto(s) | $ |
| Jewellery | $ |
| Other personal property | $ |
| Total Assets | $ |
If you have your own business, evaluating it is a complex accounting task. Your accountant looks at the “net present value,” a calculation based on your business assets, liabilities, ongoing expenses, historical revenues, and estimated revenues. But to keep things simple for this exercise, why not simply call a business broker and ask what similar businesses have sold for in your area?
List All Your Liabilities or Debts
Liabilities include credit card debt, car loans, student loans, mortgages, income taxes, life insurance policy loans, and any other loans. Use Table 2 or a similar worksheet to list your liabilities.
Table 2
| Liability | Amount Owed |
| Credit card debt | $ |
| Other charge card debt | $ |
| Income taxes payable | $ |
| Bank loan(s) | $ |
| Insurance policy loan(s) | $ |
| Car loan(s) | $ |
| Student loan(s) | $ |
| Home mortgage | $ |
| Mortgage on other property | $ |
| Home equity loan(s) | $ |
| Brokerage account loan(s) | $ |
| Other loans | $ |
| Total Assets | $ |
Subtract Your Liabilities from Your Assets
Subtract the value of the “Total Liabilities” line in Table 2 from the “Total Assets” line in Table 1. Is the result positive or negative? If it’s positive, you have a positive net worth. If it’s negative, you have a negative net worth. But even if it’s negative, don’t worry. Help is on the way! By realizing exactly how much you’re under water, you’ve successfully mastered the first step toward getting your financial life afloat.