Calculating Your Net worth

Kristilyn Wiklinson, M.S., AFC Candidate

 What is your net worth? Just a heads up, it is different from your SELF-WORTH and is in no way tied to that. It is, however, still an important part of your overall financial wellness? Your net worth is basically what you OWN minus what you OWE. Your net worth is a snapshot of your finances at one point in time. It tells you whether you are solvent, aka whether you have enough assets to pay off all of your debts. 

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The goal over time is to have an increasing net worth. It is common when you are starting out in your young financial life to have a negative net worth. You might be going to college, taking on student loans, and likely don’t have assets like a home or a large investment portfolio. The goal is to not operate on a negative net worth all of your life.
 
Experts suggest that you calculate your net worth at least once a year as part of your annual financial checkup. Every year it is good to evaluate how your saving, spending, and investing went during the previous year. This annual check-in is not an opportunity to beat yourself up or feel bad about your financial situation. It’s an opportunity to see if you are spending, saving, and investing, in line with your values and goals. If your net worth decreased, why? There may be a very good reason for that. Did it increase just a little? Are you at a point where you need to see significant increases in your net worth each year so that you are prepared for retirement? Looking at your net worth is a great way to start a money conversation with your spouse or partner.
 
When you calculate your net worth, you will need to know things like your current checking, saving, investment, etc. balances. You will also need to know the current total balance of all of your different debts (credit cards, mortgage, car loans, etc.) Make sure that you are entering the total debt amount- not just your monthly minimum payment. You will also need to have some idea of what your assets are worth. What is the fair market value of your car or house if you were to sell it today? Websites like Zillow or Kelly Blue Book can help you with an approximate estimate for some of these assets. If you have this information easily accessible when you sit down to calculate your net worth, it will make the process quicker.
 
There are many free calculators on-line, like this one from Kiplinger’s that can help you calculate your net worth. Might I also suggest a carton of ice cream to eat while you are at it. Make a date out of it with yourself or your partner and you will find that you look forward to talking about your finances more than you otherwise would!