Know Where You Stand
How do I Calculate my Net Worth?
Starting this new blogging journey had my mind racing with potential financial topics to write about. What do I want to learn? What would potential readers like to read about? What would have the greatest impact for all of us starting down the path to financial independence? There are endless topics in the realm of personal finance and on the topic of money in general.
I slowed down, took a step back and tried looking at the bigger picture. What would be the best starting point? And then it hit me… It’s almost impossible to measure our financial growth if we don’t know where we started or where we stand now. We need some sort of benchmark to periodically review to make sure we are advancing our situation in the right direction. (up)
That being said, there can be no better benchmark with regards to measuring personal wealth and individual financial growth than (da da daahhh) our net worth.
What is Net Worth?
According to the good people over at Investopedia:
Net worth is the amount by which assets exceed liabilities. Another way to say this is, it’s the value of everything you own, minus all your debts. Net worth is a concept that can be applied to both individuals and businesses, as a measure of how much they are really worth. <snip> The word “net”, in financial language, means “after subtracting expenses and debts.”
Net worth is our personal, financial score-card! In a nutshell, net worth is everything we own minus everything we owe. Simple, right? Go ahead and take a stab at calculating your own net worth b y running through the steps below. You’ll be glad you did. In fact, you’ll likely speed up the growth of your own financial net worth simply by tracking it. Seeing the number can be a bit daunting at firsthand even a little scary, but let it motivate you! I personally use mint to link and see all of my accounts in one, easy-to-use place. (Thank me later.)
How to Calculate Your Net Worth
Add Up Your Assets
Assets include things like your checking and savings account balances, balances in brokerage accounts, retirement accounts, securities such as stocks and bonds, the value of your house, market value of your car, cash, collectibles, etc. basically anything with value.
Now Subtract Your Liabilities (Debt)
Liabilities are all of the debts you owe. Add up things like mortgages, student loans, personal loans, credit card debts, etc. and subtract that total from your total assets. You should now have a rough idea of your total net worth.
So Where Do You Stand?
So, what is the average net worth of people by age? In 2017, Business Insider posted the article “Here’s the average net worth of Americans at every age.” There they take information from the U.S. Census Bureau to answer that question for you. Check it out and remember not to get too discouraged if you seem to be falling short. In future posts, we will look at ways to catapult your bottom line and discuss ways to boost your numbers.
Tips and Tools
For a long time I tried to keep track of all of my accounts and balances on an Excel spreadsheet. Fortunately, we no longer have to resort to those caveman tactics. There are a ton of tools and apps out there that can help you track this number with minimal effort. I use Mint. (Now owned by Intuit – the Quickbooks people) Mint allows you to securely add all of your accounts to give you a broader picture of your total net worth all in one place. With Mint, you can track and categorize all of your transactions in one place as well as set savings goals, create budgets, and a number of other things.
Here are some Mint alternatives that I have not tried. This list is provided by Wallet Hacks:
- Personal Capital
- You Need a Budget
- Quicken
- EveryDollar
- PocketSmith
- MoneyDance
- PowerWallet
- LearnVest
- CountAbout
- Banktivity 6
If anyone has tried any of these tools, feel free to post about them in the comments section below.
Finally: Always remember that your net worth does NOT equal your self worth. When you are starting out on your financial journey, it is important to not be too hard on yourself. Don’t get discouraged and remember that the past is the past. We are all learning better habits together.
Next up
Once you have all of your assets and liabilities totaled in one – easy to see – location, its time to start tracking you spending. Yeah, I know what you’re thinking, “that sounds super boring and tedious,” but… You need to see where all of you hard-earned money is going before you can hope to make positive changes to your spending habits, earnings and your overall net worth.
