The basic formula is easy to remember, and our other guides cover it. The part that trips people up is not the subtraction. It is deciding what the things you own are actually worth. This guide to how to determine my networth is built around the awkward items, because that is where most answers go wrong.
A quick reminder of the formula
Net worth is assets minus liabilities. Cash and debts are simple. The rest takes a little judgement, and the rule I suggest is to be honest, slightly conservative and consistent from one year to the next.
Your home
Do not use the price you paid or the number you wish for. Look at recent sales of similar homes within a mile or so, and consider the online estimate tools as a rough guide only. A realtor’s free market analysis is a better check. Then, if you want to be careful, subtract a few percent for selling costs, since agents’ fees and closing costs would come out of a sale.
Retirement accounts
Use the current balance. If you want a conservative view, apply a rough tax rate to pre-tax accounts like a traditional 401(k), since withdrawals will be taxed as income. Roth accounts need no such haircut. Pension rights are tricky; unless a pension can be paid out as a lump sum, many people leave it out of the total and note it separately.
A business you own
This is the hardest one. Options include:
- A multiple of annual profit, using the typical range for your industry.
- The value of the business’s assets minus its debts.
- A recent offer or valuation if you have one.
Whichever you pick, apply a discount if you are the key person, because a business that depends on you is worth less to a buyer. If you cannot decide, list it at a low estimate.
Cryptocurrency and volatile assets
Use the market price on the day you do the calculation. Because it can change quickly, note the date, and avoid doing the exercise right after a sharp spike or fall. Some people take an average of the past thirty days to smooth out the noise.
Vehicles and valuables
Check the used price on a reputable car-valuation site, and list the car at the private-sale figure. For jewellery, art or collectibles, count only what you could realistically sell, and use auction results or a dealer quote. The price on the insurance certificate is usually higher than the resale value.
Money owed to you
A loan to a friend counts only if you honestly expect to be repaid. If not, leave it out or write it down. A tax refund you have already been told to expect can be counted, but one you merely hope for cannot.
How to determine my networth without fooling yourself
- Write a short note for each estimate saying where the number came from.
- Use the same method each time, so changes reflect reality, not a new approach.
- Round to the nearest thousand. False precision does not help.
- Review once or twice a year and add the date.
Liabilities that people overlook
- Buy-now-pay-later balances.
- A tax bill that has not yet been paid.
- Medical bills on a payment plan.
- Co-signed loans, if you might be asked to pay.
A brief example with an awkward asset
Imagine a freelancer with eighty thousand in savings and investments, a van worth fourteen thousand, and a small design business. The business has no property and earns about sixty thousand a year in profit, mostly dependent on the owner. A buyer would pay very little for it, so she lists it at ten thousand and moves on. Her total is therefore about one hundred and four thousand before debts, which is an honest and cautious figure.
Once you have a number, our guide to what counts as a good net worth will help you see where you stand, and the simple method in how to find your net worth in four steps is a good starting framework. The Consumer Financial Protection Bureau offers worksheets at consumerfinance.gov.
What to do with it
Treat the figure as a compass, not a score. If you are unsure how to put a value on something complex, an hour with a fee-only financial planner is money well spent.
In short, how to determine my networth comes down to honest estimates, a consistent method and a written record.
General educational information, not personal financial advice.
