How To Determine and Calculate Your Net Worth

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Updated on Monday, April 29, 2019

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You’ve probably read about the sky-high net worths of the rich and famous, like Jeff Bezos ($131 billion), Bill Gates ($96.5 billion) and Warren Buffett ($82.5 billion). But as we all know, not everybody can be a billionaire.

Your personal net worth is a combination of what you own (your assets) minus what you owe (your liabilities). It’s important to know this number, because it gives you a clear picture of your financial situation. This helps shape your financial goals and measure what progress you’ve made on these goals over time.

How to calculate your net worth

To calculate your net worth, make a list of the cash value of all your assets. These include:

  • Money in your checking and savings accounts
  • Your investment accounts
  • Business interests, such as partnership and LLC interests
  • The market value of your home
  • The resale value of your car
  • Any life insurance policies you may have
  • Personal property, including jewelry, art, and furniture

Then make a list of the total amounts you owe. This includes:

  • Your home mortgage
  • Unpaid balance on your car loan
  • Credit card balances
  • Student loans balances
  • Any unpaid bills

Add up both lists to obtain the total value of your assets and the total amount of your liabilities, then subtract the total of what you owe from your assets — this number is your net worth.

There are several calculators and worksheets available online to help guide you through this process. Consider using Charles Schwab’s worksheet, Kiplinger’s calculator, or CNN Money’s calculator.

By way of example, here is a financial snapshot of a doctor’s net worth. With $100,000 in savings, $100,000 in equity in her home, and $280,000 in a retirement account, our example doctor has $480,000 in assets. However, if she has a remaining unpaid mortgage balance of $400,000, $130,000 in student loans left to pay off and $10,000 in credit card debt, she has total liabilities of $540,000. Therefore, she has a negative net worth that comes out to -$60,000.

Compare your net worth

U.S. households in 2016 had an average net worth of $692,100, according to the Federal Reserve’s Survey of Consumer Finances (SCF). This number appears high because that average is skewed by the net worths of the super wealthy, like the aforementioned Bezos, Gates and Buffett — however, the median U.S. household net worth in 2016 was significantly lower, at $97,300. Check out the breakdown of U.S. median net worth by age, which may be more helpful to put your own number in context.

U.S. median net worth by age in 2016
35 and younger$11,100
35 to 44$59,800
45 to 54$124,200
55 to 64$187,300
65 to 74$224,100
75 and older$264,800
Source: The Federal Reserve’s Survey of Consumer Finances (SCF)

Track your net worth over time

Since your net worth provides a snapshot of how you’re doing financially, it’s helpful to track this number over time. As you compare your number over the years, you’ll want to do your assessment on a regular basis.

Experts recommend that you track your number regularly, on a quarterly, semi-annual or annual basis. Staying consistent in your monitoring will give you a good sense of whether your personal finances are improving or declining over time.

It’s also helpful to keep a long-term perspective when it comes to money you’ve invested in the stock market. Compare your stock earnings or losses to market conditions. If you have money in a retirement fund that you don’t plan to access for, say, 30 years, it’s not as important if the value of your investments declined slightly over one year’s time. Keeping a long-term perspective for investments in retirement accounts could pay off over the long haul.

Other aspects of your personal finances will remain within your control, like budgeting and saving. The good news is that the earlier you begin to track your number, the more time you have to improve it.

How to improve your net worth

There are a number of steps you can take to improve your number. Implementing a daily budget is a great strategy. Saving more than you spend on a daily, monthly or annual basis can help to quickly grow your number. Looking for a job with growth potential can also help to improve your finances over time.

When you’re taking a new job, negotiate for a higher salary and regularly ask for pay raises. In addition, maximizing employer benefits like 401(k) matches, health savings accounts and company stock can also help to boost your number.

Consider investing in the stock market, as well as in your own human capital by taking courses to improve your skill sets and land higher-paying job positions or promotions in the future.

The last word on your net worth

Knowing your number helps provide you with a full picture of your personal finances. Once you understand your number, you can make adjustments to your financial life that help grow your money. Together with tracking your number, remember to maintain an excellent credit score, which gives you better access to low-cost credit, and keep your emergency fund topped up to help cope with the inevitable bumps in the road.