Calculating Your Net Worth

Have you ever heard of wealthy people being described as ‘worth X (amount of dollars)’? Maybe, this celebrity is worth 5 million dollars, or that heir is worth 35 million dollars. This is called their net worth, and believe it or not, we all have one. Some people have a 0 net worth or a negative net worth, but it’s still their net worth. Knowing your net worth may be useful from time to time when filling out some financial forms or when planning your finances Wiki .

What is net worth? Example of calculating net worth - Market Business News

Your net worth is equal to your total assets minus your total liabilities. To begin, add up all of your assets. You might be surprised at how many assets you have. The obvious are your house and investments including any retirement accounts such as a 401K or IRA, stocks, bonds, mutual funds, commodities, and real estate. Your vehicles are also assets, but make sure you only include their fair market value. In other words, if you were to sell them today, how much would you get? Some other assets include high valuables such as antiques, collectibles, and valuable art.

Next, you will need to calculate all your liabilities, or simple debt, money you owe. This includes the amount you owe on your mortgage and vehicles, whatever you owe on items you financed such as computers and other high price items, credit card debt, student loans, and absolutely any other debt you owe. A liability means you are held liable to whoever you borrowed the money from. This money is not yours which is why it’s subtracted from your assets.

Finally, subtract. Assets minus liabilities equals equity. In other words, subtract what you owe from what you have and you get what your worth, your net worth. Figuring out your net worth is a good way to see where you are in your life financially so you can set goals and make a plan of action. If your net worth is a negative number, this means you are in bad debt. Even if you get a number close to zero, you are still nowhere near where you should be for retirement. You can’t live off of social security alone unless you don’t mind downgrading how you are living now considerably.

Take your net worth as a starting point. If you have a net worth of $100,000 or more and you are under 30, you have a good start. Keep saving and investing your money so that you are at least able to maintain your standard of living when you retire. If you have an equal net worth and you are much older, you may need to be a little more aggressive in your savings, but not so aggressive in your investments to avoid losing money. Let your net worth now be a starting point for the large nest egg in your future.

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