Your net worth is the value of your assets minus your liabilities. In other words, it’s what you own minus what you owe.
To calculate your net worth, simply subtract your total liabilities from your total assets. This will give you your net worth.
Assets
Your assets are everything you own and can use to pay your debts. They can be divided into two categories:
Non-liquid assets
Non-liquid assets are assets that can’t be easily converted into cash. Examples of non-liquid assets include your home, car, and furniture.
Liquid assets
Liquid assets are assets that can be easily converted into cash. Examples of liquid assets include your savings account, stocks, and bonds.
Liabilities
Your liabilities are everything you owe. They can also be divided into two categories:
Non-liquid liabilities
Non-liquid liabilities are debts that can’t be easily paid off. Examples of non-liquid liabilities include your mortgage and car loan.
Liquid liabilities
Liquid liabilities are debts that can be easily paid off. Examples of liquid liabilities include your credit card debt and student loans.
Now that you know what assets and liabilities are, you can calculate your net worth.
To calculate your net worth, simply subtract your total liabilities from your total assets. This will give you your net worth.
For example, let’s say you have the following assets and liabilities:
Assets:
Home: $300,000
Savings account: $20,000
Stocks: $10,000
Bonds: $5,000
Total assets: $335,000
Liabilities:
Mortgage: $200,000
Car loan: $15,000
Credit card debt: $10,000
Total liabilities: $225,000
To calculate your net worth, simply subtract your total liabilities from your total assets. In this example, your net worth would be $335,000 – $225,000, which equals $110,000.
Now that you know how to calculate your net worth, you can use this information to help you make financial decisions. For example, if you want to retire early, you’ll need to have a high net worth so you can cover your living expenses.
You can also use your net worth to measure your financial progress. If your net worth is increasing, it means you’re doing a good job of saving and investing.
No matter what your goals are, knowing your net worth is a good first step in achieving them.
