Calculating your net worth can be a potentially scary task, as it is going to require you to come to terms with exactly how much you owe. You might feel safe and secure in your home, but you may owe more than your house is worth. Calculating your net worth will force you to address your financial situation. Yes, you may end up with a negative number. The first time I calculated my personal net worth, it was -$13,000.27! However, one must first find where they are at before they can determine where they are going. There is no point in setting a goal for a financial net worth of $15k next year if you're $300k in the hole.
Why Calculate Net Worth?
Your net worth will provide you with a good overview of your financial health. You can use the net worth calculator below to determine if you need to start working hard to repay debt, or if you're sitting pretty comfortably. There is no magic number that you're trying to achieve, but it will be a solid, firm number that you can look at.
In addition, this number is then something that you can track over time. It can be a rewarding motivational tool as you watch yourself climb out of debt and towards a positive net worth. It can remind you why you're working so hard to save money for the future, so that you can live off your investments. You may set yourself a goal of a certain net worth, and every year you can watch yourself get that much closer to your goal.
There aren't too many people that have taken the few minutes necessary to calculate their net worth. As a result, they are running around in the dark, trying to save money or reduce debt, but not entirely sure why. Even worse, there are those that try and try and try to save money or pay off their debts, but they don't feel like they're making any progress. If they were tracking their net worth, they might be able to see the light at the end of the tunnel, or feel better about themselves, but instead they quit because they haven't seen or felt any difference.
So calculate your net worth – not for the sake of comparing to others or bragging rights, but just so that you have a baseline that you can track. This is ground zero, the starting line, the turning point. From here, you will see progress, so check it now, and once every few months just so you can see that yes, you are making progress, even if it is slow.
How Do I Calculate My Net Worth?
Gather your financial information and be conservative when estimating your property and vehicle value. While they may feel like a million bucks, they probably aren't worth it. Check local listings in your neighborhood to get an accurate assessment of what properties around you are listing at. If in doubt, guess low. This isn't a contest, or a feel good program. This is about accurately estimating your net worth so that you have a good understanding of the truth – not of your dreams or desires. Similarly, check craigslist and local newspapers for vehicles of your year, make, and model to see what they are selling for. Take an average or guess low.
Then, all you need to do is use the net worth calculator too add up your assets, subtract your liabilities, and see what number you end up with. How does your net worth look to you? Is it scary or comforting? Will it inspire action?