How To Calculate Your Net Worth
In October of 2018, I started tracking our net worth. Your net worth is your assets minus your liabilities. I always knew ours was negative due to my car and student loans (my husband doesn’t have any loans), but I never tallied everything up to see just how much in the hole we were. Having this overall picture of my financial situation motivated me and made such a difference to my financial journey that I recommend everyone do the same.
Add Up Your Assets
The first step to calculating your net worth is to add up your assets. Your assets are everything of value that you have such as cash,stocks, IRA accounts, house, etc. I have created a net worth tracker that lists different common assets to help you out. Once you write down the value of each asset, add them up and write that number down.
Add Up Your Liabilities
Next up are the liabilities. Liabilities are debts such as your car loans, student loans, mortgage, etc. Just like with the assets, I have some common liabilities listed for you. Add all of these up and record your answer.
Subtract Your Liabilities From Your Assets
Take your total asset number and subtract it by your liability number. Here is where your emotions really kick in. When you look at the result, you will be somewhere on the scale of beaming with pride as you quit your day job to crying on the floor in the fetal position. No matter where you are, this is the point where you have to figure out where you want to be.
Set Goals
Now that you know your net worth, there are a couple of things you should ask yourself. Grab a pen/paper or open up your favorite note taking app and write your answers down.
1. Am I were I want to be?
2. What number do I want to see as my net worth?
3. By what year do I want to see that number?
4. What actions will I implement into my daily life to see my desired net worth by *insert answer to #3 here*?
Post these answers somewhere you will see them every day to remind you of what you are aiming towards.
When I saw our net worth, the first thing I wanted to do is figure out how long it would take for it to be positive. Considering our income and our usual monthly spending habits, I set our positive moment to happen at the end of March 2019. So far, having this goal and watching my net worth rise for the last couple of months has felt great.
We’ve had several unforeseen things happen in these past two months alone, however, we make sure that we adjust another part of our budget in order to reach our goal. I’m looking forward to seeing that positive number and then watching it grow from there. Don’t forget to download the free net worth tracker so you can track your net worth on a monthly basis as well.
