How to Compute Your Net Worth

Many professionals in the accounting community encourage their clients to calculate their net worth at least once a year. For persons who have complicated financial holdings, this is a must. The reason being is that sometimes it doesn’t take much of a loss or gain to change a positive net worth to a negative net worth. The quicker it is corrected and adjusted, the quicker you can turn it around.

The first category you will want to calculate is your assets. You will have liquid assets and not so liquid assets. Liquid assets are assets that you can turn into cash easily. This would be money in your checking and savings account. The money you have invested in real estate and stocks, bonds, retirement programs etc., would take time and the right circumstances to liquidate. You can list them together or separate.

You will want to conservatively put values on real property such as houses, land, vehicles and businesses. Put values on jewelry, collections of coins or paintings etc. Check your insurance policy for a listing of valuables that you might have locked away and forgotten. Add up all the value figures for the above and you will have calculated your assets. The next group you need to list and put a value on is liabilities. Liabilities are debts owed such as home mortgages, student loans, credit cards, etc. Any bills outstanding that are not paid will be in the liability category.

To calculate your net worth you will subtract your total amount of liabilities from your total amount of assets. The number you get will signify your net worth.