How to Calculate Your Net Worth

How much are you worth? Not a clue? Knowing your own net worth helps you plan for your future — and your business’s future. Here’s how you calculate it.

Do you know how much you’re worth?

Most people don’t, but as a business owner, your personal net worth may be important. Although your business is probably legally separate from your personal assets (depending on the business structure), a bank that considers giving you a business loan will likely ask for personal collateral if your business has little real value. Calculating your net worth gives you an accurate picture of how much of your personal worth you’re pledging to your business.

On a more personal level, having a clear picture of how much you’re worth helps with financial planning. Do you have enough saved for retirement? Where is your debt, and are there assets that could help you pay it down faster? What percentage of your net worth is in liquid investments, and is it allocated appropriately?

Your net worth is more than a single number — it’s an entire report full of important data.

Terms You’ll Need to Know

Before diving into the calculations, you need to know a few terms:

Asset – Any property with real value. Real estate, a car, and jewelry or art are a few examples.

Illiquid Asset – Something that can’t be converted to cash quickly without a substantial loss. Remember the housing crisis that left people underwater on their homes? Homes became an illiquid asset for many.

Liability – Something you owe — a debt.

Liquid Asset – Something easily sold for profit. Stocks might be the best example.

Personal Property – Something you own that is movable — boats, cars, collectibles, and furniture are examples of personal property.

Real Property – Property permanently attached, like a home, a barn, or a detached garage.

Gather the information for calculating your net worth

Probably the toughest part of calculating your net worth is gathering the information. Some of the information might be an estimate. Unless your real property was appraised recently, you won’t know it’s current value without paying an appraiser.

In the case of your home, look up recent sales of similar homes in your neighborhood and use those as a guide for estimating your home’s worth. These are called “comps” or comparables in the real estate business.

If you have jewelry, some jewelry stores have appraisers on staff, or they can recommend somebody.

For assets like your car or some collectibles, look at online guides that list their value. If you haven’t dug into the value of a 401(k) from a past employer or the cash value of a life insurance policy, set up online accounts with the firms holding these investments or call and request a current statement.

If you’re going to invest time into calculating your net worth, do the legwork to compile the most accurate data. The more you estimate, the more inaccurate your final calculation will be.

Calculating Your Net Worth

Calculating your net worth is simple once you have the information. It’s simply your assets (what you own) minus your liabilities (what you owe). Add everything you own including:

Money in savings or checking accounts
Actual cash
CDs or treasury bills
Annuities, bonds, mutual funds, pensions and other retirement plans, and stocks
The cash value of any life insurance policies
The value of real and personal property
Anything else that you own that has sellable value.

Next, add your liabilities:

Loans — car, mortgage, home equity, second mortgage, boat, etc.
Credit card debt
Medical bills
Student loans
Personal loans
Taxes due
Any other debt or outstanding bills

Subtract your total liabilities from your total assets. Now you know your net worth.

What’s next?

Once you do the work the first time, the calculation is easier the next time around. If you haven’t already, use a free online service to keep many of the numbers up to date in one place.

Your net worth is a very general view of your financial health. Do a quick Google search, and you’ll find plenty of websites telling you what your net worth should be as you hit certain age brackets. What might be more important is to make sure you’re saving enough for retirement, paying down debt as quickly as possible, saving for your children’s college education, and keeping money set aside for unforeseen expenses. Net worth is an important metric, but other metrics are more crucial.

Calculating your business’s net worth means having current, accurate, and convenient access to the numbers. An app like ZenBusiness Money can help you keep on top of that. Its smart dashboard allows you to manage and view your invoices, payments, and clients in one easy location.

Disclaimer: The content on this page is for informational purposes only, and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.