How to Compute Your Net Worth

Computing your net worth does not have to be frustrating or difficult. You also do not need a degree in accounting to compute your net worth. This is a fairly simple calculation that you should be doing annually. Computing your net worth on an annual basis gives you a tool to track your financial health and see whether your finances are getting better or worse over time.

Net worth is a basic financial number that shows you where you are at any given point in time. Basically, if you take all your assets and subtract all your liabilities, what you have left is your net worth. If you have more assets than debt, you have a positive net worth. However, if your debts exceed the amount of assets that you have, you have a negative net worth. While it is valuable to a point to know what your net worth is, the true value come from tracking your net worth over time.

Assets include liquid assets such as cash, checking and savings accounts, investments, certificate of deposit, bonds, cash value of life insurance, and other assets that you can readily turn into cash. Assets also include physical property such as cars, house, property, boats, computers, jewelry, and anything that you can sell and convert to cash. You should take the current market value of all these items. Liabilities are easy to calculate. You take the current payoff on all your debt, including car or boat loans, mortgage, credit cards, student loans, and any other personal loans that you have accrued. Once you subtract your total liabilities from your total assets, you have your net worth at that point in time.