Figuring Personal Net Worth

If you want to know what your net worth is, consider looking at a simple paycheck. You have a certain amount of earnings on the check. Then there are mandatory federal and state deductions and possibly things like child support or wage garnishments. When a person puts their check in the bank, they are depositing their “net” earnings – what they get to keep and didn’t slip through for taxes or other payments.

The same is true of your ‘net worth.’ If you consider – mentally or on a balance sheet - the value of all the things you have on one hand and all the things you owe on the other, the difference is your net worth.

Calculating your net worth, unless you have a lot of investments or debts, is not too difficult for most people. You need to know the approximate market value of your house, cars, collectibles, art, and any stocks or bonds you may have. If you have them, you also need to calculate the value of debts owed to you, either personal or business. Business receivables are also added if you own your own business.

Then you must tally the amounts that you owe. This usually starts with the basics: home mortgage, current unpaid property taxes, auto loans, notes payable, business debts, tax obligations, and other personal amounts such as credit card balances, student loans or private notes. The difference between the two totals is your net worth, which can sometimes be a negative number.

Some people like to figure their net worth without using their home in the calculations, as it is not a readily liquid asset. Other financial advisers argue that it is an asset though, so perhaps you should figure both ways to get a true picture of your financial situation.