consulting tip

Know Your Net Worth

Net worth can seem like a tricky topic, but it's quite simple. Your net worth is how much money you are worth. If you were to sell everything you own, then pay off everything you owe, how much money would be left? That's your net worth. Here's what that looks like in equation form: Net worth = Assets (what you own) – Liabilities (what you owe) Ready to calculate your net worth? Here's how: First, create a list of all your assets (what you own) and their estimated value. Here are some examples of assets:

  • Money
  • Investments
  • Real estate
  • Cars
  • Jewelry
  • etc. At the bottom of the list, add up the total value of all your assets. Next, create another list of all your liabilities (what you owe). Here are some examples of liabilities:
  • Credit card debt
  • Mortgage
  • Student loan
  • Auto loan
  • etc. At the bottom of the list, add up the total value of all your liabilities. Now that you have the total value of your assets and liabilities, plug the numbers into the equation above, and you'll get your net worth. If you have a positive net worth that's good. Continue working to increase your net worth even more. If you have a negative net worth, you need to take a look at your budget and come up with a plan to increase your net worth. If you're young and you have a big student loan, you shouldn't worry too much as you haven't even started working yet. Make sure to re-calculate your net worth every month or so to keep up to date with your finances. I use a free tool called Mint to track my net worth but many people recommend Personal Capital as well.