How do I calculate my net worth?

Knowing your net worth can be a useful tool to understand where you are at financially and how you measure against your financial goals. It is also a useful figure to understand when applying for credit, writing your will or if you are dividing your assets through a divorce.

Calculating your net worth is quite straight forward as it is the total of your assets minus all your financial liabilities. (The value of everything you own minus everything you owe).

How do I calculate my assets?

To calculate your net worth you simply need your basic financial information to hand. To begin you need to consider what your assets are. Start with the largest such as a house or car, and put the true value down. Remember that your assets are only worth what other people are willing to pay for them not what you think they may be worth so for a true price value look at previous house sales in the area or similar car sales. Then consider your liquid assets such as what you physically have in the bank, shares, bonds and investments.

Lastly for your assets, look at your personal possessions of value such as jewelry, antiques and other rare collectibles. When all these figures are added together these total your total assets.

How do I calculate my liabilities?

Next it is time to look at your liabilities using the same principles. Start with the largest liability, such as a mortgage or loan.  Then list your other debts such as overdraft debt, credit cards and student loans. Once all these liabilities are added up then you have your total liabilities figure.

Calculating your net worth

Take your total asset figure and subtract your total liability figure.

This equals your net worth!

To gain an accurate understanding of your worth you need to repeat this process at least once a year and be as truthful as possible. Over a number of years you can see how your net worth is progressing and use it to decide on goals for the following year.

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