Calculating & Increasing Your Net Worth

Where do you stand financially at this moment? How much is your life worth? If you had to pass on your assets and liabilities would your family be upset or proud?


Hard ass questions to answer am I right?


In a nutshell net worth is what you would have left after selling all assets and paying off liabilities. The majority of millennials will have a negative net worth, which is right on track. At this stage of life we are concerned with setting up an emergency fund, traveling, careers and figuring out how to be adult. Not many of us are making long term financial moves such as real estate investing or aggressively funding retirement. The term “net worth” only comes out of our mouths when we talk about celebrities and wishing we had their first world problems.


But I do believe that everyone who is serious about their money needs to know where they truly stand. Knowing your net worth is a great way to make goal points in your life and help lead to completing long term goals. You can gauge your progress, strength and weakness areas.


Now I can make up reasons on why we don’t try to figure out our net worth but I’m trying not to make up excuses. Which leads me to the topic of this post. How to determine your own net worth.


Simply put the equation is:

Net Worth = Assets – Liabilities


But it’s a little bit more complicated just then that. Figuring the net worth is rather easy but knowing what to look at is another story. Lets start first with how to calculate your net worth. So pull out a pencil and paper!



Step 1 – Adding Assets


In this step you want to list all assets in one column. This step shows everything you have that has value. For all assets you want to put the fair market value for it. So even though you think your 2000 Honda Civic with 124,000 miles is worth $10,000 that doesn’t mean someone will pay that price. And that is a true example, I have had a client try to get that amount from the insurance company before. Below are a list of assets to total up.


  • Liquid Assets – Cash, cash in banks, T-Bills, certificates of deposits, money market funds and anything else that can liquidate to cash quickly (1 – 12 months).
  • Retirement Investments – 401(k), 403(b), IRAs, Roth IRAs and any other retirement investment vehicle.
  • Real Estate – Primary residence, secondary residence, investment properties. Keep in mind to use values of fair market value, use Zillow for a quick reference.
  • Business Assets & Equity – If you own a business you can include the business net worth or significant business assets.
  • Personal Assets – Items such as cars, jewelry, furniture and other personal effects.
  • Personal Loans Receivable – This includes any loans made to family, friends or others.
  • Other Assets – Any other items that have worth but don’t fit in a category above can be place here.


Step Two – Add Liabilities

Just like the prior step list all liabilities in a column to total at the end. This is essentially any type of account you owe money on. Below are a list of assets to total up.


  • Consumer Debt – Credit card balances, car loans or small personal loans
  • Mortgage – Balance of mortgage on any owned real estate properties
  • Business Loans – balance of a business loan or line of credits
  • Student Loans – Include private and federal loans. If you are a consignor on a loan add it as well.
  • Other Liabilities – Medical debt, tax liabilities, child support and any other amount that is owed but may not fit above.

Step Three – Find the Difference


After you have the total of your assets and liabilities you have the easy step of subtracting liabilities from assets. Very simple process that just requires some time to get organized. At the end you should have something that looks similar to this:

Don’t focus too much if your sheet isn’t as pretty, at this point all that matters is knowing the numbers.

What if You Have a Negative Net Worth?


Welcome to the club, our net worth is about $26,000 in the red! We have meetings every Monday to talk about our feelings and plenty of tissues. Kidding of course! As I said in the start, the majority of millennials will have a negative net worth due to student loans and still building up cash and assets. Having a negative net worth just means you have work to do. To increase your net worth start by analyzing liabilities. Figure which liability is causing a constraint on monthly cash in-flow. Which liability can be paid off quickly. And more importantly confirm if the majority of liabilities were used for reasonable reasons and not consumer debt. If you find that it is then spending habits need to change and your main goal should be to pay down consumer debt.


What if You Have a Positive Net Worth


Congratulations! This is a huge accomplishment that you shouldn’t take lightly. The question you now need to ask yourself is how to maximize your worth. Think of ways to increase the value of your assets. For example, if you own a home and add a bathroom will the appreciation of the home pay for the bathroom and more? Or if you are satisfied with your net worth then figure what is the best investment vehicle for your risk tolerance to keep up with inflation.


How to Increase Your Net Worth


Pay Off Liabilities

When you start paying off liabilities you will notice that the net worth won’t change at first. However, by paying off liabilities you will save money long term and allow more cash inflow in the long run. The extra cash can be put to pay off more debt, purchase new assets or increase value of current assets.


Asset Value Grows

Owning a home or stocks will give the most return as far as increasing value on a asset. Theoretically improving a home, cosmetics or actual repairs, will increase the value of the asset. Purchasing stocks or bonds will grow your cash and long term your investment asset.


Cut Expenses

Nobody likes to hear they need to cut their expenses and lower their living standards. When expenses are cut it allows cash to be freed up. The extra cash can serve just as an emergency fund builder or you can invest the cash to increase value of other assets or pay off liabilities.


Smart Asset Purchases

People find themselves in debt for a lot of reasons, such as these.  By purchasing an asset, such as a home, with appreciation and affordability in mind the chances of staying in debt are decreased. Be smart and calculated with large purchases.


Talk to a Professional

This option is often overlooked with the main reason being it cost money and potential clients too embarrassed about their situation. Short-term thinking would dictate to build up a net worth money should be saved. But long-term thinking would dictate to build my net worth I need a professional in my corner giving me insight to my finances and taxes.



Overall knowing your net worth is best for tracking progress. Though it will not give you the full picture that you need it is an amazing start. To give yourself a complete financial diagnosis you will need to create a balance sheet and cash flow statement for yourself. For the time being I suggest to calculate your net worth, determine what areas you can advance in and track your progress throughout the year.


Here is the excel sheet I use for tracking my net worth.


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