How to Calculate Your Net Worth

Calculating your net worth is a valuable exercise at any income or savings level. It allows you to paint an accurate picture for yourself and for anyone who needs to know (such as loan officers or life insurance agents) of your current financial position.

Calculating your net worth can also be a useful evaluation tool each year to examine where you are and where you need to be. This allows you to set goals and work toward specific financial milestones.

To calculate your net worth, you should take the following steps:

· List, with the value in dollars, your most valuable assets. For many people, this includes home(s) and some vehicles. Use the most accurate, current evaluations of value. Be conservative in listing the values, as inflating these numbers does no good to you, and gives you an inaccurate picture of your worth.

· List the current dollar value of all liquid assets. This includes savings and checking accounts, cds, mutual funds and stock funds. This does also include retirement savings such as Roth and regular IRAs, and a 401K or pension plan. You will need your most recent financial statements to accurately complete this section. Many brokerages and banks also have online access where you can find the balance of each account.

· Add to the list the current dollar value of any personal assets. When you value these items, list their value as the amount you could get if you sold the item today. Because you paid a great deal for an Italian leather couch 10 years ago does not make it worth thousands today. Some items that may make the list include jewelry, musical instruments, valuable collections, and art. List valuable (over $500) items individually, then have one aggregate sum for “the rest of the household items.”

· Add the three sections to find your total assets.

· Now work on the liabilities section. Begin with the largest debts, such as home and vehicle loans. List the outstanding balance on each loan.

· List all personal liabilities, such as credit card debt, student loans, short-term debt for furniture or electronics, and every other liability you may have – amounts you are obligated to pay.

· Add the two sections of liabilities.

· Subtract the total amount of the liabilities from the total assets. The resulting figure is your net worth.

· Examine the number and the factors that led to the number, and make plans for improving it before the next year. Then repeat the process the next year and compare.