How to Calculate Your Net Worth (and Why It Matters)

Melissa is a mother of 2, lives in Utah, and writes for a multitude of sites. She is currently the EIC of HarcourtHealth.com and writes about health, wellness, and business topics.

Have you ever wondered how much you’re really worth? Obviously, each person is worth more than the sum total of their assets or accumulated wealth, but from a financial perspective, it pays to know how much you’ve got to your name. Calculating net worth is relatively simple, and it can help you make smarter financial decisions in the future-or just satisfy your curiosity about where you stand.

Calculating Net Worth

Your net worth is the total value of all your assets (including financial and non-financial assets) once all your debts and liabilities are accounted for. To get this value, you’ll add up all your assets, then subtract all your liabilities. It’s all very simple, but you have to make sure you’re including all the right things in the right places.

Let’s start by going over your assets. You’ll need to total up the value of all these items:

Money in your bank accounts. Start by totaling up all your money in all your bank accounts, including both checking and savings accounts (and any accounts you don’t use often).

Money in your investment accounts. Next, glance at any investment accounts you have, including your brokerage accounts as well as retirement accounts like your 401(k), and any IRAs you might have open. If you trade assets like stocks or index funds, these values will fluctuate regularly, so just take a current snapshot of their value.

Personal vehicles. Then, you’ll need to estimate the market value of your vehicle. Depending on your current circumstances, you could calculate the trade-in value of your car, or estimate its current value based on what you paid for it and how much it should have depreciated in that time. Do note that different regions have different vehicle valuations, and may have different trade-in policies and practices; for example, if you own a car in Australia, you’ll want to research the trade-in value of your car by consulting an Australian dealer.

The market value of your home. Note that this figure is based on what your home would sell for now, not what you paid for it originally. It may be higher or lower than what you spent.

Any business interests you have. This one can get complicated. If you’re the owner or partial owner of a business, you’ll need to calculate the value of your ownership stake, a process that could easily warrant its own article.

Personal property of significant value. You’ll also need to include personal property of significant value. You won’t need to total up the value of all your possessions, but if you have a musical instrument collection or some valuable antiques, it may be wise to include them.

Cash value of insurance policies. This won’t apply to everyone, but you may also include the determined cash value of any insurance policies you currently hold.

Any other owned assets you can think of. You may also consider other owned assets you have if they fall outside the categories listed above.

Once you’ve added all these values together, you’ll need to subtract any liabilities you have to your name, such as:

What you owe on your mortgage. You can view this amount on your most recent bank statement. Hopefully, it’s less than the current market value.

What you owe on your vehicle(s). Similarly, you should know what you currently owe on your vehicle.

Credit card debts. If you have credit card debt, it should also be included in this calculation.

Student loans. The average person from the class of 2016 graduated with more than $37,000 in student debt. Look up your current balance and include it.

Any other loans. All loans and outstanding debts need to be included here.

Why Does It Matter?

Now you have a figure, either positive or negative, that tells you roughly how much value you have attached to your name. So what? How can this help you?

Debt perspective. Having a negative net worth means you owe more money than you currently have. This isn’t a sign of total failure, but it isn’t a good thing either; having this information can awaken you to the idea that it’s time to get serious about paying off your debts.

Goal determination. Everyone has different financial goals, but setting those goals can be complicated. Knowing your current net worth can help you set an achievable goal for your net worth in the near future.

Trend tracking. You can also use several snapshots of your net worth to project an overall trend. Is your net worth growing or shrinking? How fast is it growing or shrinking? What habits or changes in your life were responsible for those fluctuations? It’s a valuable reflection point.

Estate planning. If you have a significantly positive net worth, it may be a trigger point to start thinking about estate planning. How will your assets be handled after your death?

Your net worth is an important figure to know, but it’s also important to remember that this doesn’t define you as a person. Having a negative net worth doesn’t mean you’re a failure, and it’s not a good idea to compare your net worth to others’. Everyone has different financial goals, and finances are only one aspect of your life.