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How to Calculate Your Net Worth. A Step-by-Step Guide.
Figuring out your net worth can be a daunting task. It means coming face-to-face with your total debt and potentially facing some hard truths. However, knowing your net worth gives you a jumping off point for goal setting and allows you to more effectively plan for the future, as well as prepare for the unknown. Knowing your net worth also allows you to effectively measure progress and be a better steward of your financial security.
Do you know how to calculate your net worth? If you don’t, you’re not alone. The unfortunate news is that many Americans have no idea what their net worth is or how to go about estimating it. The good news is that you can easily figure yours out and get on the road to increasing it. Below, I have outlined a few tips, as well as answers to commonly asked questions. Have a look and see what you’re doing well and what you could do better.
How Do I Calculate My Net Worth?
The short answer is that your net worth is equivalent to the dollar value of your assets minus your debts. Naturally, assets include things like your home, your car, any securities, savings, etc.… Debts are fairly self-explanatory and include but are not limited to credit card balances, medical bills, your car payment, your mortgage, and student loans.
If Math isn’t Your Thing, There Are Plenty of Tools to Help You Calculate Your Net Worth
NerdWallet has a nifty tool that allows you to simply plug in your information and it will spit out a total. With that in mind, there’s really no excuse not to have a pulse on your net worth.
Keep in Mind that Net Worth Can be a Positive OR Negative Number
Your net worth can be less than zero if your debt is greater than your assets. But just because you aren’t flush today doesn’t mean that you cannot start taking steps to get back into the black. This is one of those cases where knowledge is power.
If Your Net Worth is Negative, Don’t Panic
There are plenty of ways to improve your financial situation. You can set and stick to a budget, take on a side hustle, and also channel any unexpected income into paying down debt. In fact, I wrote an entire article on ways to make extra money that you can read right here. (Insert link).
When Should I Check My Net Worth?
If it isn’t something you are already doing, the answer is: now. The more informed you are about your financial welfare, the easier it is to take positive steps to improve your situation and get to a place of stability and wealth.
How Often Should I Check My Net Worth?
The answer depends on you. But I would suggest doing so quarterly, at a minimum. The more diligent you are with your financial well-being, the easier it is to make and stick to a budget.
Related Articles on Budgeting:
When did you first calculate your net worth? How often do you calculate it now?
Knowing Your Net Worth is One of the Greatest Tools for Financial Growth
It can be tempting to remain completely unaware of your total value on paper. But ignorance isn’t bliss in this case. Not knowing what you have makes it next to impossible to keep track of your progress and really only serves as a disservice to your future.
