How To Calculate Your Net Worth To Work Towards Building Wealth

Did you know that 61% of women, and nearly 4-in-10 men, are unsure about calculating their net worth? No wonder the words ‘empowerment’ and ‘finances’ don’t click in the mind of the average American…

How does knowing my net worth Help Me?

This number gives you a clear picture of your financial HEALTH. It’s a quick snapshot that can help you steer your budgeting, spending, and investment choices based on what’s most important to you. Most people feel uncomfortable going through this exercise because the calculations are foreign to them OR because they’re afraid to see the truth on paper.

But the reality is that becoming financially confident means figuring out the basics – this is the start to building your path to financial freedom.

Let’s Do It

Calculating your net worth is simpler than it may seem. On one side of the ledger, list all your assets, and everything you own. This could be your home’s value, your savings, or your 401k. For instance, your home might be valued at $400,000, you’ve saved $10,000, and your 401k boasts $50,000. (Example below)

On the Other Side

On the other side of the ledger, label your debts/liabilities. This includes your mortgage, student loans, and credit card balances. If, for example, your mortgage stands at $300,000, student loans total $25,000, and credit card debt lingers at $5,000, your total liabilities amount to $330,000. (Example below)

The Most Important Number 

Subtract your total liabilities from your total assets. This is your net worth. It’s a snapshot of your current financial value, and it’s the number you should aim to grow consistently.

Assets – Liabilities = NET WORTH💰

Examples of Assets (made simple):

Savings Account: Money saved in a bank account that earns interest over time.

Retirement Accounts (401k, IRA/Roth): Investing in retirement accounts not only builds your wealth over time but can also provide tax advantages.

Real Estate: Any property or land owned

Stocks and Bonds: Investments in the stock market can grow your wealth if chosen wisely

529 plans or educational accounts: these educational funds are assets and can make your life easier when your kid goes to college.

A Business: If you own a business that generates profit, it’s an asset. However, I’d suggest you do a separate networth sheet for your business because it will likely have it’s own liabilities.

Life Insurance: Certain types of life insurance have a cash value component that can be considered an asset; check with your advisor/broker if you’re unsure. 

Examples of Liabilities:  Mortgage, Car Loans, Credit Card Debt, Student Loans, medical bills, personal loans, 401k loans, car loans/leases, and any money owed to family.

Building wealth is about increasing your assets and decreasing your liabilities. Treat your finances like a business. Delving into your numbers to see where your money is going and where it’s being built will help YOU decide your next steps in growing your money.

* The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a decision. Investing includes risks, including fluctuating prices and loss of principal. No strategy assures success or protects against loss.

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