If you have ever wondered how do you find networth, the good news is that the formula is simple. The harder part is being honest and thorough when you list what you own and what you owe. This guide walks through it step by step.
How do you find networth? The formula
Net worth equals total assets minus total liabilities. Assets are things you own that have value. Liabilities are the debts you owe. If the result is positive, you have positive net worth, and if it is negative, you owe more than you own.
Step one: list your assets
Write down everything of value, using realistic current values and not what you paid.
- Cash in checking and savings accounts.
- Investments, including stocks, funds, bonds and the value of retirement accounts.
- The market value of your home, if you own one.
- The resale value of vehicles.
- The value of any business you own, based on a fair estimate.
- Other items of significant value, such as jewellery or collectibles, at what they would realistically sell for.
Step two: list your liabilities
Include all debts:
- Mortgage balance.
- Car loans.
- Student loans.
- Credit card balances.
- Personal loans and any money owed to family.
- Unpaid taxes or other bills.
Step three: subtract
Add up each list and subtract the total of liabilities from the total of assets. That is your net worth.
A quick example
Suppose someone has 12,000 in savings, 40,000 in retirement accounts, a car worth 8,000 and a home worth 250,000. That is 310,000 in assets. If the person owes 190,000 on the mortgage, 6,000 on a car loan and 4,000 on a credit card, liabilities are 200,000. Net worth is 110,000. The numbers are only an illustration.
Tips for accuracy
Use conservative values
It is easy to overestimate what a house or a car would sell for. Use recent sales of similar items.
Be consistent
Use the same method each time so you can compare year by year.
Include everything
Missing a small debt can distort the picture, especially if there are several.
For a company
Businesses find their net worth, called shareholders’ equity, in the same way: total assets minus total liabilities on the balance sheet. The balance sheet is part of the financial statements that most companies prepare each quarter or year.
For a public figure
You cannot calculate a celebrity’s net worth with certainty, since you do not see their accounts. Magazines such as Forbes use public filings and estimates of private assets, which is why they call them estimates.
How often to check
Many people review their net worth once or twice a year, or at least annually. Tracking it over time is more useful than looking at a single number, because it shows whether your finances are moving in the direction you want.
Questions readers ask
Should I include my house?
Yes, as an asset, with the mortgage as a liability. Some people also calculate a version without it to see their liquid wealth.
Can net worth be negative?
Yes. It is common for young people with student loans.
Do tools exist?
Spreadsheets, budgeting apps and bank dashboards can track it automatically.
Common mistakes
The most common error is overvaluing assets, especially a home or a car, or forgetting small debts that add up. Another is treating a retirement account as fully available when withdrawals may come with taxes or penalties. A third is comparing your figure with someone else’s without checking whether they include the same items. To avoid these, write down your method the first time and use it every time. Keep a simple spreadsheet with the date, the assets, the liabilities and the result, and update it on the same date every year, for example on your birthday or on the first of January.
Why it is worth doing
People who track their net worth often say it changes how they think about money. Instead of focusing only on income or monthly spending, they begin to look at the overall direction. A rising line, even a slow one, is encouraging, and a falling line is a signal to look at the cause, such as new debt or investments that have lost value. It takes about half an hour once a year, and it is free.
*General information, not financial advice. Values in the example are illustrative only.*
More like this: browse our Personal Finance section. For background, see the Wikipedia entry.
