Calculate Your Net Worth
Occasional checks on your net worth--your current assets minus liabilities--can yield valuable intelligence about your financial health.
This is an updated version of an article that originally published on June 22, 2019.
I can still visualize the passbook that accompanied my first savings account--navy faux leather with our local bank's logo etched in gold. I remember the thrill of writing in the $5 interest payment I earned on my first $100, and the pain (albeit short-lived) of withdrawing $79 to pay for the bike I had researched intensively, a metallic blue Raleigh three-speed. (In hindsight, that choice smacks suspiciously of the influence of my noncomfortist dad; all of the other girls at my school rode sky-blue Schwinn Breezes.) I recall strategizing about how I could build my balance back up to $105 or beyond.
Passbook savings accounts are mostly all long gone, along with 5% interest rates and English-made bikes for $79. And my financial life is more complicated, too: My husband and I have 401(k)s, IRAs, and taxable accounts, as well as two health savings accounts--one for saving and one for investments. There have been home loans, home equity loans, and one car loan, too. In contrast with my fifth-grade self, I can no longer tell you--to the penny--how much money I have to my name on any given day.
Nor is that a worthy goal: Life is way too short to spend it in Ebeneezer Scrooge mode, and if you have money invested in stocks, you're apt to find that your net worth fluctuates a bit each and every day, often for no apparent reason. The more you have invested, the more these dollar amount fluctuations can look like something to worry about, even though they probably aren't.
Yet conducting very occasional checks on your net worth--taking stock of your current assets minus liabilities--can yield valuable intelligence about your financial health, or that of your household/family. It can make plain whether servicing your debt is swamping your ability to save, and provide an assessment of how you're doing on that mother of all financial tasks: replacing your human capital with financial capital. It can help you see if your assets are overly concentrated in a handful of assets--like your house or employer stock--or is well diversified across financial, real estate, and other asset types. Crafting a net worth statement is the ideal starting point for determining your household's big-picture financial priorities.
We've created a Net Worth Worksheet to assist you in this job; you'll need to print it to use it. Alternatively, you can create your own net worth statement in a spreadsheet. If you save your net worth statement--either a printout or an electronic document, be sure to keep it safe, either in a locked file drawer or by using a password-protected spreadsheet. Here are the key steps to take to document and analyze your net worth.
Step 1: Document your assets.
Begin to take stock of your net worth by gathering up your most recent investment statements or going online to retrieve your current account balances. Note that for some accounts, such as your bank account or retirement accounts featuring publicly traded securities, you'll be able to get a very current, very specific read on what those assets are worth. For other assets, such as the value of your home and car, you'll need to do a bit of educated guessing. Real estate sites can help provide a ballpark estimate of what your home is worth, while Kelley Blue Book's website can help you estimate the value of any cars that you own.
Find the following amounts:
Step 2: Document your liabilities.
On the other side of the ledger, record any outstanding debts that you owe, including the following:
Step 3: Calculate and analyze net worth.
Armed with total assets and liabilities, you can then calculate your net worth by subtracting the smaller number from the larger. Armed with this number, consider the following questions: