Why You Should Calculate Your Net Worth Regularly
Do you know how much you are really worth? Your net worth adds up the current value of what you own minus what you owe to give you a net dollar amount that reflects your financial situation, so it’s an important metric to track over time as it shows you’re improving whether your financial status or not. decreases. Your net worth is an overall snapshot of your financial health, and tracking it can show whether habits like saving and paying off debt are having a positive impact on your money.
How to calculate your net worth
Know your total assets
Calculating net worth begins by counting all current assets, which may include:
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Cash accounts such as savings and checking accounts
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Investment accounts such as retirement plans and brokerage services
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Estimated current resale value of your home
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The value of vehicles or other property owned
Next, report on debts
The next step is to understand the total amount of debt you currently have, which could consist of:
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Mortgage balance
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Car loans
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Student loans
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Credit card balances
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Any other outstanding loans
Subtract debts from assets
Once you have determined the current monetary value of both assets and debts separately, simply subtract your debts from your assets to calculate your net worth.
For example: Total assets = $300,000; total debt = $150,000; net worth = $150,000.
Simply put, your net worth = assets – liabilities. There are also more specific online calculators .
Track changes over time
The power of knowing your net worth comes from tracking it at regular intervals, such as quarterly or annually. As you pay off debts and accumulate additional assets, you will see your total net worth increase, indicating positive financial growth.
Having clarity on your complete financial picture will allow you to make more informed decisions that improve your situation over time. Calculate your current net worth—you may be richer than you think.