How to Figure Your Net Worth

One of the best things you can do in order to assess your financial situation is to figure out your net worth. When you have an idea of how much you are worth, you can begin developing a plan that will help you reach your financial goals. Here is a look at how to figure your net worth.

Assets

The first thing you do is tote up your assets. Assets are things that can bring you money -- potentially more money than you paid in. An asset is something with appreciating value, or something that brings in a steady income. Your investment portfolio is an asset. Your home is probably the most valuable asset you have. Even artwork or jewelry can be assets, if they are fine, and have been appraised at a high value. Your checking and savings accounts, as well as your retirement accounts, are considered assets. Do not include your monthly income in this total. Just add up the value of what you have now. And example might be as follows:

Home value: $215,000
Roth IRA: $10,000
401(k): $50,000
Mutual fund: $25,000
Company stock options: $7,000
Savings account 1: $6,000
Savings account 2: $11,000
Checking account: $4,000
Appraised stamp collection: $2,000

Total assets: $330,000

Liabilities

The next step is to figure out what sort of liabilities you have. These are things that drain your income regularly, without giving you something in return. They are also your debts. You will consider your mortgage in this category, since it is a debt. It will decrease the net worth boost you get from owning a home. Here is an example of a possible liabilities list:

Amount remaining on home mortgage: $135,000
Car loan: $8,000
Student loans: $20,000
Credit card 1: $2,500
Credit card 2: $500
Credit card 3: $4,000
Medical bill: $6,000
Furniture store financing: $1,500

Total liabilities: $177,500

Figure your net worth

Now, subtract your liabilities from your assets: $330,000 - $177,500 = $152,500 net worth.

Sometimes, a person owes more than the value of his or her assets. This is known as negative net worth. If you have negative net worth, it is especially important to work hard to get out of debt. You can see how knowing your net worth can help you begin setting goals and making a financial plan. Your net worth can provide you with a financial snapshot that allows you to see where you are more clearly.