Net Worth Calculator
Use our net worth calculator to calculate your net worth given all of your assets and liabilities.
Your Net Worth:
On this page:
How to Calculate Your Net Worth
Your net worth is simply the excess of the value of your assets over the value of your liabilities. This is commonly used for businesses, but you would use the same net worth formula for an individual.
This calculation shows what is left if an individual’s or company’s assets and liabilities were liquidated. A positive net worth means that the value of the assets is greater than the value of the liabilities.
If the value of the liabilities is greater than the value of the assets, then the individual or business has a negative net worth.
Net Worth Formula
The net worth formula is shown below:
net worth = assets – liabilities
Thus, your net worth is simply equal to your assets minus your liabilities.
If you were to take a basic accounting course, you might see the formula rewritten as assets = liabilities + net worth, but the formulas are exactly the same.
The accounting formula is written differently than the net worth formula to show that assets are either funded from debt (liabilities) or equity (net worth).
These variables make up the balance sheet of a company.
The balance sheet ranks the different variable categories by how liquid they are. The liquidity of an asset is how easy it is to turn into cash.
The more liquid an asset or liability is, the higher up on the balance sheet it will be. The less liquid, the lower it will be on the balance sheet.
How to Calculate Your Assets
The first step to calculate your net worth is to aggregate the value of all of your assets. The textbook definition of an asset is anything that provides a future economic benefit.
The most common forms of assets for an individual would probably be cash in the bank (checking or savings accounts), investments, vehicles, and real estate.
Businesses have other common assets that individuals typically won’t, such as inventory and accounts receivable, so we will just focus on the assets of an individual.
Cash, whether it be in the form of a checking account or savings account, is obviously the most liquid asset, so it would be at the top of the balance sheet. The value of your cash balance is the amount you have in the bank.
Investments are the next most liquid asset, so they would appear below cash on the balance sheet. Investments, such as stocks, can usually be sold immediately and turned into cash.
The value of the investments is what is shown in your investment account. The value of both cash and investments are easy to calculate, since they are exactly what is shown in your accounts.
The value of vehicles and real estate is harder to calculate because you can’t fully know their value unless you put them up for sale.
Therefore, they are less liquid than cash or investments, but vehicles are more liquid than real estate. It would take some time for a vehicle to be sold, but it usually takes a few months for a house to be sold.
The best way to calculate the value of a vehicle is to use a car website to value it for you. There are websites, such as Kelley Blue Book, that value vehicles.
All you need to do is enter your vehicle’s information, and the website will provide the value. Do this for each vehicle you own, and this will be the total value of your vehicles.
Real estate can be valued the same way. There are home websites, such as Zillow, that will show your home’s value and the sales price of other homes that have recently sold.
How to Calculate Your Liabilities
After the total assets have been calculated, it is time to calculate the value of the liabilities. A liability is anything that is owed to another.
For individuals, this is primarily all forms of debt. Companies may have other forms of liabilities, such as accounts or salaries payable, but these are far less common for individuals.
The value of any debt is just the balance of each debt you owe.
For example, let’s assume an individual has the following values for their assets and liabilities.
|Credit Card Balance:||$10,000|
|Student Loan Balance:||$20,000|
|Auto 1 Loan Balance:||$7,000|
|Auto 2 Loan Balance:||$10,000|
The total value of the assets is $515,000 ($5,000 + $25,000 + $100,000 + $50,000 + $20,000 + $15,000 + $300,000 = $515,000). The total value of the liabilities is $172,000 ($10,000 + $20,000 + $7,000 + $10,000 + $125,000). Now we can plug these amounts into the net worth formula.
net worth = $515,000 – $172,000
net worth = $343,000
This individual has a net worth of $343,000.
How to Improve Your Net Worth
The two ways to improve your net worth are to either increase your assets or decrease your liabilities. But let’s look at this in more detail.
The first method is to increase your assets.
There are a few ways to do this. In the short term, your assets will increase with each paycheck, assuming you are currently making more than you are spending on a monthly basis. Increasing your income is your best method to increase your net worth.
If the value of your investments or home increases, then so have your assets and, therefore, your net worth.
Some investments, such as savings accounts or CDs, may also pay interest, which continues accumulating over time.
The other way to increase your net worth is through the reduction of debt. This is not as easily done. If you lower your debt by making a payment, your net worth actually goes down slightly because your cash balance (an asset) declines.
The full payment does not go towards lowering the principal balance because part of the payment goes towards interest.
If someone helps pay down your debt or if the debt is forgiven, you can lower your debt. For example, if you have a parent paying your student loans, and they make a payment for you, your debt would fall, and your net worth would increase.
Or if you have a student loan with the government that is forgiven due to a prearranged agreement, such as a teacher working in a low-income school, the same thing would occur.
While paying off debt doesn’t exactly increase your net worth, it does get you closer to paying the loan off, which will then allow you to devote more of your income to activities that will increase your net worth.
Another method to lower debt is to reduce the payment on installments and loans such as credit cards. Refinancing debt is one way to do this, which can allow you to reduce the interest rate on these loans, increasing the amount of the payments that go toward principal.