What is your Net Worth?

Your net worth is simply a score card of how well you are doing financially. It will tell you how much wealth you acquired. Basically you are going to want to subtract your liabilities from your assets. This will tell you how much wealth you actually have. Many people are shocked to find that they actually have no wealth at all. In far too many cases people have a negative net worth, that is they owe more that they have. This is a sign or real financial difficulty and it needs to be addressed.

Basically your net worth is a guide to how well you are doing financially. It is your assets minus your liabilities. When you add all this up you should know how much wealth you have acquired. Hopefully when you do calculate your net worth the number at least comes out to be positive. In many cases it doesn’t and this often comes as quite a shock. Debt has become such a serious problem that a great many people actually have a negative net worth. This means they are in real trouble financially since they basically have no savings. This means that losing their job would be a disaster and retirement is going to be a real problem.

In order to calculate your net worth the first thing that you are going to want to do is add up all of your assets. Start with the big ticket items like your house and your car. You will need to estimate the value of these so make sure that you are realistic when you do this. A lot of people think they are worth a lot more than they actually are because the grossly over value things like their home. There is little value in lying to yourself so use a conservative estimate. You are also going to want to add up the value of any savings or investments that you have. You will also need to put an estimate on the value of your other possessions. Once you have all this you simply add it all up and you get your assets.

The next part is where the real fun starts; you are going to have to add up your liabilities. Most people are shocked the first time they do this and see how much they actually owe. You will need to take the amount outstanding on your mortgage and your car loan. Also you will need to add in your credit card debt, and any student or personal loans that you still owe money on. Basically anybody you owe money to is a liability and needs to be counted. Once you have added all of this up you are going to want to subtract it from your assets. Hopefully the number is positive. If not you have big problems. This is something that you should do every year so that you can see how well you are progressing financially.