net worth

How to calculate your net worth

Jan. 8, 2019

739 words long, 4 minute read

If you have read any personal finance sites, a stat that people often talk about is their net worth. Bloggers often write status reports that include their net worth on their path to fire. Platforms like Mint or Personal capital can help in calculating your net worth, but I find them to always be slightly off. Sometimes these platforms don't support your bank or investment account and you end up calculating it yourself anyways. I find it best to go to pen and paper and calculate your net worth yourself for complete accuracy.

If you want to figure out what your net worth is by doing it yourself, you've come to the right place. We will teach you how to calculate your net worth to give you a clear idea of where you sit.

We should note that when you say "net worth" it means something different for every person. Some people think cash and cash equivalents while others might think of just investment value. For our purposes we are going with the "traditional" definition where net worth is a snapshot of the worth of your entire financial life.

What does net worth mean?

Net worth means the entire value of all of your assets minus debts and liabilities. It is meant to be a quick snapshot of your complete financial picture. It indicates your total "value" in a financial sense

In a perfect world your net worth will always be trending upwards. Staying consistent with paying down debt and investing should keep driving your net worth upwards. Some factors that would drive down your net worth could be market downturns, taking on more debt, or drawing down on your investment assets.

Some of the items that make up your assets could be:

  • cash
  • your house
  • investments

There is a debate on whether you should include your house in your net worth. Most people do and in the examples we will run through I will include house as part of your net worth. The main argument against including your home in net worth are: 

  • homes are illiquid (hard to get rid of if you need to your home equity in cash)
  • renters don't have any home equity to add to their net worth, so it isn't an equal comparison

Being that calculating your net worth is a personal endeavor, I honestly would do whatever you think is best. It's not too difficult to calculate both with and without home equity to see where you stand as well.

Your liability will include debts and liabilities like:

  • home mortgage debt
  • credit card debt
  • student loan debt
  • personal loans

Given that home mortgage debt can often be in the hundreds of thousands, you could possibly have a negative net worth. This situation is more common than you would think and it isn't necessarily a bad sign. Knowing your net worth then gives you the information you need to choose what you want to prioritize. You could choose to pay down debt fast, continue to buy more real estate, etc. 

With all this run up, let's get into actually calculating the thing.

What's the formula for your net worth?

The formula for calculating your net worth is:

the sum of all your assets - the sum of all your liabilities

The formula is dead simple, the hardest part is actually tracking down everything. I find it useful to create a list of all of my assets and liabilities on separate tabs in excel. I write them all down and double check that I haven't forgotten anything. Then I use the SUM function in excel to easily add up everything in my list.

Net worth example

To illustrate the formula above let's run through a quick example. Our example person has the following assets:

  • 401k: $27,500
  • Post tax investment account: $9,500
  • Cash: $6,000
  • House value: $250,000 (last appraised at) 

They then have the following liabilities:

  •  Student debt: $17,000
  • Mortgage on the house: $187,500

Let's sum up all assets: $27,500 + $9,500 + $6,000 + $250,000 = $293,000

And sum all liabilities: $17,000 + $187,500 = $204,500

Then use our formula: $293,000 - $204,500 = $88,500 

Not too shabby! Notice how the mortgage offsets the home value to only count home equity towards the net worth. This person already has a tidy net worth and as they pay down their debts it will continue to grow.


Are you already calculating your net worth? What are you using to track all of your accounts? We would love to hear how others are using their net worth to help them make more informed financial decisions!

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