Monthly Archives: June 2014

How To Calculate Your Net Worth

To get a clearer picture of how you’re doing financially, it can help if you sit down and calculate your net worth. Your net worth is a good indicator of how you’re doing overall, and it can show you how much consumer debts, like credit cards, are hurting your bottom line.

To calculate your net worth, you’ll make a list of your assets and subtract your debts from that. What’s left is your net worth. But some people don’t know everything they should consider when calculating net worth.

Here are some of the important items you should add.

Your House

Your house will go in both columns. You’ll put the market value of your home in your assets column. But you also need to put what you still owe on your house onto the debt side.

So if your house is worth $200,000, and you still owe $150,000 on it, it will help your net worth by $50,000.

Investments

Any 401ks or IRAs you own should go on the asset side of your net worth. But keep in mind that investments can vary wildly from year to year. If you’ve been having an exceptionally good couple of years, don’t feel too smug about it.

Be prepared for those investments to level off at some point, so when they do, you don’t get too discouraged about how much your net worth has lowered.

Your Vehicles

As with your home loan, your vehicles will go in both columns, unless you have them fully paid off. Use an online calculator like Kelley Blue Book to figure out your car’s market value.

Your Bank Accounts

You’ll want to add any savings accounts, money market accounts, or checking accounts into your asset list.

Personal Belongings

You won’t want to go around from room to room mentally calculating what you could get for each item if you decided to sell them. That would take way too long and it’s highly unlikely you’d ever find yourself in that situation.

Instead, a better approach is to factor in any belongings that are truly valuable, like diamonds, art, or antiques. Things that would sizably increase your net worth if you were to try to sell them.

Businesses

If you own a business or a share in a business, you should add that to your assets as well. If you don’t have many assets, but you own a business that’s booming, you’ll be pleasantly surprised when you’re calculating your net worth.

Figure what you could realistically sell it for and add that amount to your assets. Any building or business debt that you have has to be accounted for on the debt side.

Credit Cards

If you owe on a credit card, it will go on the debt side. Unlike with mortgages or vehicles, there are no positive figures that will go on the asset side. That’s why it’s a great idea to get rid of credit card debt as soon as you can.

Student Loans

Any student loans must be tallied too. While it may feel bad to watch your net worth take a hit because of the amount you owe for your education, remember that if you chose wisely, that degree will help your bottom line over the long run.