To find out your net worth, you need to first sum the total value of all things you own and then subtract from it the sum that you owe.
The formula to find out net worth is simple and can be defined as:
Net Worth = Total Assets – Total Liabilities
For instance, if the total assets that you possess come down to $ 150,000 and the sum that you owe is $50,000, then your net worth is $100,000.
You don’t require any special software to calculate net worth. Just keep a calculator and a list ready with the total value of all of your fixed and intangible assets along with the total liabilities.
What Does Net Worth Mean?
Net worth means your financial position at some point in time which is easy to understand.
Your assets refer to the items you own for which you have a financial value. Your liabilities mean money that you owe to others.
Thus, it shows you what remains after paying off all your liabilities from your assets.
Individuals can earn well but not have any worth.
Conversely, an individual can earn a modest salary but possess considerable value because of savings and low debt.
So, the net worth is not equivalent to salary.
Step 1: Make a List of Your Assets
Start by creating a list of everything of worth that you possess.
There is no need to be overly precise with your figures on this first attempt. Make a comprehensive inventory of your assets first, and then give them a ballpark estimate of their current market value.
Below are common assets that might form part of your inventory:
- Cash on hand and in checking and savings accounts
- Money market accounts
- Securities such as stocks, bonds, and mutual funds
- Retirement accounts
- Real estate
- Businesses you own
- Vehicles
- Valuable personal items
- Other types of investments
- Digital currencies
Write down the estimated value of all the items you have listed.
| Asset | Estimated Value |
| Savings account | $15,000 |
| Retirement account | $35,000 |
| Investment account | $20,000 |
| Car | $18,000 |
| Home | $250,000 |
| Total Assets | $338,000 |
The important part is to use a realistic current value.
In the case of a bank account, determining a balance is fairly straightforward. When it comes to an investment account, you must check the current value of the investment. With respect to a home, one may use a reasonable estimate based upon recent market data as well as a professional appraisal.
Step 2: Calculate the Value of Your Property
Some assets are easier to value than others.
The house you own is usually the biggest item you have. However, you do not have to use the same price you paid for the asset years back.
You can consider the worth of the house today.
You can consider:
- The recent sales of comparable houses
- Current listings of properties being sold
- Appraisal done recently
- Authorized property valuation service
The same principle applies to vehicles.
For example, if you purchased a car for $30,000, it doesn’t have to be of that value today. Instead, use its current resale value.
You will not have to list every small household asset. You can add furniture, clothing, and electronics, but avoid inflating the number.
Step 3: Add Up Your Investments
You should factor in the value of your investments in your total assets.
Investments include stocks, bonds, mutual funds, retirement plans and all other forms of investments.
You will want to use the present value of these investments rather than your original amount of investment.
For instance, you could have invested the sum of $10,000 into a particular account and the current balance reflects a $13,500 value.
In this case you will calculate your net worth using the value of $13,500.
If you experience fluctuations in the value of your investments that is to be expected.
You will also want to consider the value of your various retirement plans since they represent assets even if they have restrictions on when you can utilize the funds.
Step 4: List All of Your Liabilities
Now make a list of everything you owe.
This list will include your liabilities.
Typical liabilities include the following:
- Mortgages
- Credit card debts
- Vehicle loans
- Student loans
- Personal loans
- Medical debt
- Business loans
- Tax obligations
All other amounts owing
Make sure to use your current balance, not the original sum you borrowed.
In the case of a car loan for $25,000 where you have made repayment of $10,000, then your current balance is approximately $15,000.
As you can see from this simplistic example:
| Liability | Amount Owed |
| Mortgage | $180,000 |
| Car loan | $10,000 |
| Credit card debt | $4,000 |
| Personal loan | $6,000 |
| Total Liabilities | $200,000 |
Step 5: Add Your Total Assets
After listing your assets, add up their value.
For example, assume you have:
- Savings = $15,000
- Retirement accounts = $35,000
- Investments = $20,000
- Car = $18,000
- Home = $250,000
Then your total asset value will be:
$15,000 + $35,000 + $20,000 + $18,000 + $250,000 = $338,000
Thus, your total asset value will be $338,000.
Step 6: Add Your Total Liabilities
Add all your liabilities together. This means includes every loan and every unpaid amount you have such as:
- $180,000 for a mortgage
- $10,000 for car loan
- $4,000 in credit card debt
- $6,000 for the personal loan
For example:
$180,000 + $10,000 + $4,000 + $6,000 = $200,000
Thus, your total liabilities are $200,000.
Step 7: Subtraction of Liabilities from Assets
Now that you have all of the information needed to calculate your net worth you can use the following formulas:
Net worth = Assets – Liabilities
For example:
$338000-$200000=$138000.
Your total amount of net worth would then equal $138000.
This indicates that after the deduction of total loans from the above mentioned total values of assets you would have $138000 remaining.
What If Your Net Worth Is Negative?
A negative net worth is a situation in which a person has more liabilities than assets.
This means:
Assets – Liabilities = Net Worth
As in:
$40,000 − $65,000 = −$25,000
A negative number does not invalidate the process; it simply means the person needs to pay more in debts than they own in assets.
There can be many reasons for this, which include large student loans, mortgages, business loans, or credit card debt.
The important part is to know the number; once it is known, changes can be tracked over time.
How Often Should You Calculate Net Worth?
You can calculate your net worth once or several times a year.
While some people have no problem checking their net worth once every six months, others prefer to do so monthly, especially if they are actively taking steps to save or eliminate debt.
Checking it on a daily basis usually helps little because the fluctuations in investment values usually render a lot of noise without revealing much relevant information.
Following a schedule allows you to measure your progress easily.
For instance, you can calculate your net worth:
- At the beginning of the year
- Every quarter
- After you have finished paying off a large debt
- After selling or purchasing real estate property
In instances of major changes in your finances.
Common Mistakes When Calculating Net Worth
A few simple mistakes can make the result less useful.
Using Old Asset Values: Don’t write off a value, because it’s easier. Use what is a realistic value for an asset in the moment.
Forgetting Retirement Accounts: Retirement savings are some assets. Include them in your calculation.
Ignoring Small Debts: Just because a debt is small, all debts need to be included for an accurate final figure.
Mixing Income with Assets: Just because you receive a paycheck, it does not mean that the money you make is an asset.
Double Counting the Same Money: Be careful when moving money to a different account. If you move $5,000 from your checking account to your savings, you still have $5,000, not $10,000.
Net Worth vs. Liquid Net Worth
Overall net worth is your total assets including, home, vehicle, savings, and investment portfolio assets.
Liquid net worth is your total assets that can be quickly turned into cash.
For example, the equity in your home may represent a valuable portion of your net worth but it cannot be converted into cash immediately. The cash balance in your bank account is readily available.
Both types of net worth are valuable. Overall net worth provides you with a clear view of your finances while liquid net worth gives you an idea of the amount of cash available for use without selling property.
A Simple Net Worth Worksheet
You can create a basic worksheet with two sections.
Assets
| Item | Value |
| Cash | $_____ |
| Investments | $_____ |
| Retirement accounts | $_____ |
| Real estate | $_____ |
| Vehicles | $_____ |
| Other assets | $_____ |
| Total Assets | $_____ |
Liabilities
| Item | Amount Owed |
| Mortgage | $_____ |
| Credit cards | $_____ |
| Car loans | $_____ |
| Student loans | $_____ |
| Personal loans | $_____ |
| Other debts | $_____ |
| Total Liabilities | $_____ |
Then use:
Total Assets − Total Liabilities = Net Worth
Why Tracking Net Worth Can Be Useful
Net worth gives you a simple number to track over time.
For example, your net worth may go up if you are saving, investing, paying off debt, or increasing the value of your property.
On the other hand, your net worth may go down due to major purchases or losses in the stock market.
The most important thing is to look for the trends rather than just a single amount.
For example, here are your net worth numbers:
January: $80,000
April: $86,000
July: $93,000
October: $101,000
As you can see, this tells you that your net worth has gone up all year long.
In summary, calculating your net worth is easy. Make a list of all your assets (everything you own), then add up your debts (all money owed). Finally, subtract what you owe from what you own.
Net Worth = Total Assets − Total Liabilities
Once you know how much you are worth, keep tracking it to see how it changes.
5 Free Websites to Calculate Net Worth Online
You do not have to calculate net worth by hand every time. There are many websites providing free online calculators that can do the math for you. Most of these calculators require you to provide your assets as well as your debts. Once you enter the necessary numbers, your liabilities are then subtracted from your total assets to produce an estimated net worth.
Here are five free websites you can use to calculate or track your net worth.
1. NerdWallet Net Worth Calculator
You can use NerdWallet’s no-cost net worth calculator to figure out how much you have in assets compared to how much debt you have incurred. The result takes into account typical assets and liabilities, including cash and savings; investments; goods (such as a car or a house); and debts (such as mortgages, credit cards, or student loans). In terms of process, users enter their value–their assets and liabilities–into a table in order to receive their net worth.
NerdWallet can help individuals better understand their finances using linked accounts or custom data about assets and liabilities.
2. Bankrate Net Worth Tool
Bankrate allows you to use its net worth calculator for free online, allowing you to put in your debts and assets. That way, the net worth tool produces a number that shows the difference between the two values, then there is an option to get an estimate of where the net worth will stand in ten years.
This is helpful if you want to know not just your current net worth. For instance, you can use the tool to learn more about where your net worth will go if your assets grow, or your debts change.
However, please note that future numbers will depend on the assumptions made. Thus, they should be viewed only as estimates.
3. Empower Net Worth Calculator
Empower offers a variety of free net worth tracking tools through its website. The net worth calculator lets you see all of your assets and liabilities together, including your investment information and any changes you wish.
Unlike a basic calculator where information is entered only once, Empower focuses on ongoing net worth tracking by enabling users to link their financial accounts.
According to Empower, its Personal Dashboard is free to use. To use its account-based net worth tracker, you need to register with Empower and link your financial accounts.
That makes their service better suited for those who prefer ongoing net worth tracking instead of just one-off checks.
4. AARP Net Worth Calculator
AARP offers a free net worth calculator that asks for details about your assets and debts. It covers real estate, vehicles, investments, cash, mortgages, credit card debt, student loans, and other loans.
The tool has a useful projection feature. Once you enter your data, the tool provides an estimated change to your net worth over a period of 10 years based on your provided growth and liability data.
The AARP calculator is useful for those who want to manually input their data and receive a current net worth as well as a long term projection.
5. Ramsey Net Worth Calculator
Ramsey offers a free net worth calculator which uses the basic net worth calculation of assets minus liabilities. With this calculator you can input common assets such as cash, retirement holdings, investment accounts, cars, and property. You can then enter all of your liabilities that you owe such as mortgages, auto loans, student loans, and credit cards and derive the difference.
At times you may just want a quick calculation of your net worth. Thus, even if you already know what you have and what you owe, you could use this tool to determine your net worth.
Another advantage of the Ramsey tool is that it also clarifies the distinction between assets and liabilities, and how something such as a house can be an asset, while the mortgage on it represents a liability.
Which Free Net Worth Calculator Should You Choose?
The five calculators mentioned are great to use to calculate your net worth; however, each works slightly differently.
If you want to do the calculation manually, the steps can be done easily with NerdWallet, Bankrate, AARP, or Ramsey. Empower is made primarily for ongoing tracking of accounts.
Make sure to have up-to-date balances for all accounts and debts before your calculation. It is very important to use a realistic value for home and car assets as well. Your final number will help provide you with a better overall view of your financial situation.
The most important thing to keep in mind is the core formula:
Net Worth = Total Assets − Total Liabilities
A calculator will do the math for you quickly; however, the accuracy of your result is determined by your exact information input into the calculator.