How to Calculate Your Net Worth
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In the world of personal finance, a lot of emphases is placed on the small everyday things you do with your money. I’m guilty of this focus as well. I spend far more time working on my budget and evaluating my spending day in and day out than I do looking at my big picture finances.
Taking the Time to Evaluate Your Finances as a Whole
The closest I get to taking a gander at the big picture is when I do a debt update each month and even then I’m only looking at my debt. I don’t look at my total savings, my 401k or even the value of my belongings. In short, I rarely bother to calculate my net worth. I’m guessing I’m not alone.
While I’m not going to share my net worth (I think sharing my debt is enough) I would be remiss if I didn’t do a post on how to figure out your net worth. So without further ado here is the obligatory personal finance blog net worth post.
How to Calculate Your Net Worth
At it’s most basic calculating your net worth looks like this:
Assets - liabilities = Net Worth
What it actually means:
Assets = savings, investments, property owned etc.
Liabilities = Debts, other things costing you money
So let’s take a look at what this would mean in a real world example:
Sample Assets and liabilities:
Car: You car is currently worth $12k, but you still owe $7k on the car loan
401k: $25k
Emergency Fund: $3k
Student Loans: $35k
Net Worth = $12k(car value) + $25K (401k) + $3k (E-fund) – $7k(car loan) – $35k (student loan)
Net Worth = -$2k
Yup, it is totally possible to have a negative net worth (given my student loans, my net worth is negative) and sadly it is not that uncommon, particularly if you are a recent graduate just starting out.
If you are calculating your net worth for the first time and find yourself in the red, don’t get too discouraged. Your Net Worth is constantly changing. If you want to change it even more quickly, then ramp up your debt repayment. It’s up to you how quickly your Net Worth changes.
Be a Snoop, Check Out Other’s Net Worth
Rockstar Finance has an amazing list of Blogger’s Net Worth. Seriously there are over 200 bloggers on the list that share their net worths. Their net worths range from -$186k to over $2 million. It is a great list of people willing to share how they are working to change their net worth for the better. I can’t imagine a better way to get some inspiration and tips to better your own net worth.
The Net Worth of Personal Finance Bloggers
Some Things to Consider
Always take everything with a grain of salt. It is wonderful that these bloggers are willing to share their net worth, but keep in mind they may choose to keep some things anonymous. The post on Rockstar finance explains and I’d like to reiterate that the bloggers are from all walks of life with different incomes, family sizes, and ages. All of which can impact how they calculate their net worth.
Remember personal finance is personal and you shouldn’t compare your beginning with somebody else’s middle. Just keep doing you and working towards your financial goals, you’ll get there eventually.
Do you calculate your Net Worth on a regular basis?
I’m on that list – calculating my net worth every month is one of the major reasons I think it’s gone up so much since I started. It’s pretty much doubled since I started my blog in 2013 and I think it’s because I’m so aware of it.
It is amazing how much more you accomplish when you are sharing your progress on a blog. There is no way I’d have paid off my credit cards as quickly as I did without my blog.
It has been sometime since I calculated my net worth, I know that on paper I’m in the positive but I truly view myself as in the negative. For instance a large portion of my net income comes from two things. The value of my cars, and my 401k. The thing is that I don’t know as if I would get full value on my cars and I know if I cash out the 401k right now I wouldn’t get the full amount.
Like you said each person is different I like to think of my net worth as what I can actually get my hands on, not what I’m worth on paper. But regardless it is a good number to know.
I calculate my finances every month. It’s very important to make sure how money is moving from my accounts every month. Also it effectively helps me save money.