How To Calculate Net Worth
It Doesn't Need To Be Difficult

Important information for any business is where it stands now. Its bottom line. The same for us.

So we need to know how to calculate net worth. Calculating your net worth can be easy, as long as you have the financial information you need.

Before we get started calculating it, be sure you know what net worth means. If you're not sure, read our simple definition of net worth.

What You'll Need

The most important thing you'll need is information about each asset and each liability.

Be sure to have numbers of how much you currently owe on vehicles, your house and any other buildings, plus credit cards and loans.

You'll also need the value of each asset. Be sure to be conservative (even very conservative) when estimating the value of vehicles, real estate, jewelry, numismatic coins (but not bullion coins) and other assets that can have a subjective value.

You'll also need a calculator and a pen and notebook (or a file on your computer) to record all the information in one place.

Calculating Your Net Worth

Separate out the information for the three types of assets you may have:

• Fixed assets, ones that won't (usually) vary by much, like real estate.
• Furniture, household items (appliances, etc.), jewelry and collections, at their current value. If you're not certain about their current value, be conservative. We usually list furniture and like items at 50% of their purchase price, since we're unlikely to ever receive more than that if we sell them.
Liquid assets, including savings and checking accounts, cash, stocks, mutual fund units and the like.

You may want to list stocks, mutual funds, etc., at their after-tax value, to take into account what they'll be worth after paying capital gains or dividends tax on them. That way, you're not inflating your net worth.

List all the assets in the fixed and furniture/collections group together as illiquid assets (ones that are not easily sold). List the liquid assets as a separate group.

Add all the assets together to get your total assets.

Liabilities

Separate out the information for these types of liabilities:

• Longer term, fixed-rate, such as your house and car.
• Short-term loans with a fixed or stable interest rate.
• Credit card, gas card and store card balances, payday loans, etc., which have high interest rates.

List the short-term and card debts together. These are the debts you'll want to pay off the fastest.

The Calculation

To calculate net worth, simply subtract the liabilities total from the assets total. If the balance is negative, you owe more than your assets are worth. If it's positive, your assets are worth more than the liabilities.

If you have assets that go up and down regularly (they're volatile), or you're paying off debts quickly, you'll want to update your net worth every 3 or 6 months. Otherwise, do it annually.

What Do I Do With This Information?

Now that you have all the numbers at your fingertips and see them all on one page (or computer file), you can see what you can do to improve your net worth the most.

If you have no debts except a house, then you should be dumping all your extra cash into assets appreciating more than the inflation rate, such as silver and gold, or certain stocks, or exchange traded funds (ETFs). Click here to learn more about investing in these types of assets.

If you have a large number of card debts and high-interest loans, you should be paying those off as quickly as possible. That will give you the highest return on your dollars. Click here to learn more about reducing debts as quickly as possible.

Even if your focus is on paying off debt, make it a goal to buy at least one ounce of silver every month (currently in the $30-$35 range). That will help you build your appreciating assets and give you the sense that you're accomplishing something positive in your life. (Yes, paying off debts is positive, but they can often feel like a negative, since your assets aren't growing.)

When To Calculate Net Worth

The best time to calculate your net worth is right now! The sooner you have a clear picture of where you stand right now—your bottom line—the sooner you'll know what to do about improving it.