The Net Worth Calculation

Net worth is the difference between what is owned versus what is owed. So long as what is owned is more than what is owed, then you are in a decent financial position, if not a great one. The larger the gap, the better.

In order to figure out your net worth, first add up everything you own:

  • House -> fair market value on Zillow or Redfin
  • + Car -> fair market value on Kelley Blue Book
  • + Investments -> current value
  • + Retirement accounts -> current value
  • + Savings -> current value
  • = Total Owned

Then add up everything you owe:

  • Credit card debt
  • + Student loans
  • + Car loan
  • + Mortgage
  • + Unpaid bills
  • + Any other debt
  • = Total Owed
Net Worth = Total Owned - Total Owed

As an example, I will walk you through my current net worth (updated 5/6/19), which I track every month. Some calculate this every day or week through apps like Personal Capital or on an excel sheet, so choose what works best for you and stick to it, but at a minimum track your net worth once a month.

Currently, I do not own a house. I have a beat up, but running 2004 Honda Civic worth $1,000.00 (mainly for its parts). My 401K has $7,300.00 (see my post here on 401Ks). My health savings account has $2,100.00. My Roth IRA has $450.00. My savings account has $1,000.00 and my checking has $1,700.00. This means my total owned is:

Total Owned = $1,000.00 + $7,300.00 + $2,100.00 + $450.00 + $1,000.00 + $1,700.00
Total Owned = $13,550.00

Without ownership of a house, I do not have a mortgage to pay, and neither do I have a car loan. I paid off my student loans on March 1st of this year, and my credit card debt is currently sitting at $30.00. So my total owed is:

Total Owed = $0 + $0 + $0 + $0 + $0 + $30.00
Total Owed = $30.00

If I decided, today is the day I stop everything, selling all of my stuff, quitting my job, and living off of the remainder, then my net worth is the result. So I finished this equation by taking the total owned above of $13,550.00 and subtracting from it the total owed of $30.00.

Net Worth = Total Owned - Total Owed 
Net Worth = $13,550.00 - $30.00 
Net Worth = $13,520.00