How to Calculate Your Net Worth
You want to become debt free, or own a home. You want to travel the world, or go back to school, but before you can develop your plan to get there, you need to know where you are.
Net worth is what you own minus what you owe. You own what are called "assets" - like a house, a car, retirement savings, maybe even jewelry, and you owe what are called "liabilities" - like a mortgage, a car loan, a student loan or credit card debt. There are 3 simple steps to figuring it out.
|Line of credit||$3,000|
|Credit card debt||$5,000|
ASSETS ($346,000) - LIABLITIES ($266,000) = NET WORTH ($80,000)
In this case the number is positive, but the number could also be negative - even way, way negative. It doesn't matter so much what your net worth is today - you can't easily compare it to any one else. What does matter is how it moves over time. Generally speaking, you want it to keep going up over time so that you have some money to pay for groceries when you stop drawing a paycheck.
But you can't tell if it is going up or down if you don't know what it is.
You'll be surprised how it moves over time!