Net Worth Calculator: How To Calculate Your Net Worth

A net worth statement gives you a clear picture of your financial situation. A net worth statement gives you a clear picture of your assets and liabilities. Let’s look at what a net worth statement is, how to create one, and how to use it to better understand your financial health.

How To Calculate Your Net Worth

What is a net worth statement?

A net worth statement is essentially a basic accounting of all of your known assets (also called your gross value), minus any of your liabilities (debt). Adding these together constitutes your net worth.

This specialized financial tool helps you identify your current financial situation by subtracting what you owe from what you have. When evaluated regularly, this information can help you track your financial progress.

Why a net worth statement is important

A net worth statement helps you visualize all your assets and liabilities in one place, giving you a clear picture of your money and other assets, as well as your debts.

This information helps when you need to make an important financial decision, such as whether you can afford retirement, whether you should make a big-ticket purchase, or other significant financial decisions.

A net worth statement can also help you eliminate debt or reach other financial goals by letting you visualize your progress.

How to create a net worth statement

Determine which information to include. Let’s go back to the construction of the net worth statement itself. First, you should decide what to include in your calculations. Many people recommend including only liquid assets such as cash and investments, and big-ticket items such as your house, cars, artwork, jewelry, and anything else you might be able to sell if necessary. You typically wouldn’t include items like clothing, furniture, and other items you use in daily life.

This distinction may be clearer when you consider the complications of trying to appraise everything you own, especially items that may not have a clear resale value. As a result, you may end up overestimating your net worth. You need to think this through and take the time to prioritize your assets reasonably.

Use realistic valuation. You should include the actual resale values of any items on your statement. For automobiles and other vehicles, use a standard guide like Kelley Blue Book. (Of course, don’t discount the local market value either.) Use good judgment and do some price research for each of these.

List all assets and debts. Next, gather all your financial information and list it on paper; a two-column sheet makes this easier: one for assets and one for liabilities. Add up your assets, then do the same for your liabilities. Once you are done, you subtract your liabilities from your assets:

Net worth = assets – liabilities

Net worth can be positive or negative.

How often should you do a net worth statement?

Many financial advisors suggest people do a net worth statement at least once a year so they can compare it to previous years. You can do this anytime, but a good time is when you’re dealing with all that financial information at tax time.

You might consider creating a net worth statement more frequently if you are an active trader or investor, or if you are going through many financial changes, such as making new investments, paying off debts, opening or closing financial accounts, any time you see a major change in income or loans, or if you expect to see any significant changes to your net worth.

Meet the Author

Ryan Guina

Ryan Guina is The Military Wallet's founder. He is a writer, small business owner, and entrepreneur. He served over six years on active duty in the USAF and is a current member of the Tennessee Air...

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