How to Calculate Your Net Worth

To figure your net worth, you need to figure out how much everything you own is worth and how much money you owe to various creditors. Using a computer program, such as Quicken, can help you keep your finances in order and make calculating your net worth a piece of cake

Net Worth Formula

At the most basic level, your net worth is a measure of your assets minus your liabilities. Your assets include money or things that are worth money, such as investments, retirement accounts, real estate, paintings or cars. Your liabilities include anything that you owe, such as credit card debt, bank loans, mortgages and unpaid bills.

Don't Forget These Items

Certain debts are easy to overlook. "I've found that sometimes people overlook student loans if they took out a whole bunch of different loans or if it's been quite a while since they took out them out," says Katie Brewer, certified financial planner with Your Richest Life. "The National Student Loan Data System can be a great tool to find information on most all of your student loans." In addition, don't overlook your mortgage. For example, if your home is worth $130,000 and you have a $110,000 mortgage, you have to count both of those, which together increases your net worth by $20,000.

Compare Net Worth Changes Over Time

Your net worth at any given time is just a snapshot of how you're doing at the moment, but unless you compare how it's changed over time, you won't know if you're improving or declining. "I encourage people to look at their net worth trend over a longer time period like a year rather than a short period like a month," says Brewer. "If investments are part of your net worth, you want to make sure that you know how much of your net worth increase or decrease was due to the markets and how much of it was due to debt payoff for savings. Don't be discouraged if your net worth has decreased over the last year because the market is in a down period. If you are saving for retirement and have 10 years or more until retirement, you should be invested in a good amount of stock investment, where sometimes the market will go up and sometimes the market will go down

Other Financial Measures

Net worth isn't the only measure you need to be aware of when you're checking your finances. "Make sure that you don't get too carried away in monitoring your net worth that you invest all of your money," cautions Brewer. "You should still have money in cash reserves so that if an emergency happens, you have that money quickly available." For example, if you stash all of your money in a retirement plan that you can't access until you're 59 1/2, you might have a large net worth, but if you have a medical emergency and have to carry a high balance on your credit card to pay the costs, it's going to have a negative impact on your net worth.

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