040: Building Your Net Worth Statement

Your net worth can be an extremely useful tool in measuring your economic status and overall financial progress from year to year. Your net worth is essentially a grand total of all your assets minus your liabilities. In other words, your net worth is the figure you get when you add up everything you own and then subtract from that the value of all of your debts. Dustin R. Granger, CFP® and I have put together a simple tool that you can use to help you calculate your net worth! Check out this Worth It episode to learn more!

Here’s What You’ll Learn [1:15] Building your net worth statement [2:45] What does net worth mean? [6:00] Knowing your net worth is the best way to start planning for your future [9:00] Working backward from retirement to figure out exactly how much you need [9:45] Calculating your net worth statement [15:30] Calculating your liabilities [20:00] Your net worth! [21:15] Toujours Worth It Financial Planning [23:15] Worth It Inspirations How to calculate your net worth

Calculating your net worth can be a simple process, but it requires that you gather all the information surrounding your current assets and liabilities. Gathering and organizing this information can be a bit of a chore at first, but ensures that you (and anyone else who might need it like your spouse or financial advisor) have access to the information when needed.

Calculating your net worth only requires basic financial information regarding the things you own and the debt that you owe. Here's how to get started:

Calculate Your Assets

You will want to gather your latest statements for your more liquid assets. These assets include checking and savings accounts, cash, CDs or other investments such as brokerage accounts or retirement accounts. Next, list your largest assets. For most people, this could include the value of their home, any real estate properties, or vehicles like personal cars or boats. In the case of a business owner, this list would also include the value of their business, which has its own more complicated calculation. Make sure you use accurate estimates of market values in current dollars. Now, take all of the assets you have listed in the first three steps and add them together. This number represents your total assets.

Calculate Your Liabilities

Start with the major outstanding liabilities such as the balance on your mortgage or car loans. List these loans and their most current balances. Next, list all of your personal liabilities such as any balance on your credit cards, student loans, or any other debt you may owe. Now, add up the balances on all of the liabilities you listed above. This number represents your total liabilities.

Calculate Your Net Worth

To calculate your net worth, simply subtract the total liabilities from the total assets. For this exercise, it doesn't matter how big or how small the number. It doesn't necessarily matter if the number is negative. Your net worth is just a starting point to have something to compare against in the future. Repeat this process once a year and compare it with the previous year's number. By comparing the two, you can then determine if you are making progress or getting further behind on your goals.

Resources & People Mentioned Mr. Money Mustache Toujours Worth Software - Guided Wealth Portfolios Commanding the Table - Ella Brennan Ralph Waldo Emerson Quote Connect With Danielle and Dustin Ask your questions! On Facebook On Twitter Connect with Dustin on Twitter: @DRGranger