calculate net worth

How to Calculate Personal Net Worth

When was the last time you did your financial health check?

Most people are not sure how to manage their finances because they are not taught in schools, or at home. Money may have been a taboo subject in the family or it has always led to argument between the parents, resulting in limited exposure to financial knowledge.

The fact that most high schools and colleges do not provide sufficient financial education to teach personal finance does not help either.

Some people are fortunate enough to learn the keys to financial success at home, from knowledgeable friends that are keen to share, or are willing to read up multiple personal finance books to acquire the knowledge to perform a proper financial health analysis.

While some other may never discover the key to financial success, or learn them the hard way — by making a number of costly mistakes along the way.

The more financial errors you commit, the more money leaves your pocket and out of your life. To make things worst, costly mistakes make you feel like you are not in control of your money, leading to stress and anxiety when it comes to managing money.

It all stems from not being able to master your finance.

Developing good financial habits


Regardless of your income, you can make your every dollar stretch further if you practice good financial habits and avoid costly mistakes. In fact, the lower your income, the more important it is for you to make the most out of your income and savings because you don’t have the next fat paycheck to fall back on.

From this point onward, please avoid making financial mistakes or overlook the wealth building strategies that will be discussed throughout the steps.

When taking into account your financial health, you should keep track of your overall financial situation, which includes reviewing your income, spending, savings, future goals, and insurance.

If you are like most people, you have either never done it before or you did so a long time ago that it probably is wise to reevaluate your financial health.

When you go through this step, try not to dwell on your financial “problems”. Instead view them for what they really are – various opportunities to improve your financial situation and ditch bad financial habits.

The more improvement you can identify, the greater the potential you may have to build real and long-lasting wealth, and at the same time accomplish your financial and personal goals.

What is my net worth?


Road sign to assets and liabilities

Determining your financial net worth doesn’t have to be complicated

 Your financial net worth is like a barometer to your personal financial health. It shows you at a glance how much you actually own and  indicates your capacity to accomplish major financial goals such as buying a home, raising kids, retiring, and withstanding a major, unexpected expense or loss of income.

If you are able to set up a solid system around your net worth, which we will guide you through the rest of the steps, you will be able to accomplish your life goals and withstand any crisis. For starter, we do not need a complicated financial health calculator. Just follow through the steps and you will be in good shape.

With that said, your net worth is your financial assets minus your financial liabilities:

Financial Assets – Financial Liabilities = Net Worth

 Adding Up Your Financial Assets

To define financial asset — an asset is real money, investment or property that you can convert into your currency to buy things now or in the future.

They generally include money in your bank, stocks, bonds, mutual fund accounts, retirement accounts (including those with your employer), business and real estate that you own.

What about my personal residence? Is it an asset? We generally don’t recommend including your home in the calculation unless you plan to sell it off someday or live off the money you have now tied up in the equity (by taking out a reverse mortgage).

If you plan to eventually tap into the equity (the difference between the market value of your home minus any debt owed on the property), you can add that portion of the equity that you expect to use to your list of assets.

Assets can also include your future expected income: for example social security benefits and pension payments (if applicable). However, these assets are usually in the form of monthly payments instead of a lump sum.

We will explain in a moment how to tally these financial benefits into your financial assets.

Consumer items such as your car, stereo, laptop and iPhone DO NOT count as financial assets. You may be tempted to add these to the list but you cannot live off them unless you sell them.

Therefore, ignore your personal possessions unless you plan to sell them off in the near future.

Subtracting Your Financial Liabilities

In order to get your financial net worth, you must subtract your financial liabilities from your assets. Liabilities include loans and debts that you still owe, such as any consumer credit including credit card loan, auto loan, student loan, payday loan, medical loan, and any other personal loans.

In short, to figure out your liabilities, include money that you have borrowed and have to pay back. At this stage, you do not need to include the interests that are attached to your loans. We will deal with the interests in the following steps. Just focus on principal amount that you need to pay back.

Include mortgage debt on your home in your liability checklist only if you include the value of your home in your asset list. Add in the debt owed on any other real estate that you own (because you count the value of investment real estate as an asset).

Example of Net Worth Calculation

TOTAL ASSETS$485,000.00
Cash Savings$10,000.00
Emergency Fund$9,000.00
Mutual Funds$11,000.00
IRAs (Roths & SEP)$35,000.00
Home Value (Market Value)$300,000.00

Note: As a shortcut, multiply the benefits (social security or employer’s pension) you will collect monthly in retirement by 240 (12 months per year times 20 years) and add the amount into your assets.


Student Loan-$22,000.00
Credit Card Loan-$8,000.00
Auto Loan-$4,000.00
Payday Loan-$500.00


Net Worth
Total Assets$485,000.00
Total Liabilities-$234,500.00


Congratulations! You have just determined your financial net worth. If your net worth is negative or less than half your annual income, do take notice. But if you have just started working, having a low net worth is normal and don’t be too concerned.

However, don’t get depressed if you are not where you want to be yet, because it will only get better from now on. You are here because you want to improve your finance, and you will succeed if you stick to it.

In the subsequent steps, we will help you create your long term financial plan that would eventually lead you to financial freedom.


This article is one of 6-step series “Achieve financial freedom in 5 years time“.

next: step 2 – establish emergency fund


Start Emergency Fund


  1. Mike

    Hi Edward,

    I really enjoyed your article about net worth calculations 🙂

    The subject matter in question reminded me a lot about corporate finance (i.e. how to calculate the net value of a company).

    I was wondering what your thoughts were with regards to calculating the net worth of an individual via the following equation: NET WORTH = (Future IN-cash-flow) – (Future OUT-cash-flow).

    Many thanks, and keep up the great work 🙂

    Kindest regards,


    • Edward

      Hi Mike,

      Thanks for dropping by!

      You can only use the “future cash flow” equation only if you are certain that your future cash flow will remain the same. It’s hardly applicable to self-employed or business owners who may have fluctuating cash flow.

      It’s always better to use your current cash flow, and only do projection for the future if it is guaranteed to happen.

  2. Louis

    Hi Edward,

    Thanks for much for your sharing about the concept of understanding our own net worth. I believe a lot of people do not have this concept to look into their own net worth for planning some proper financial goals in future. Especially for the retirement planning, not only for the elderly, but also some younger or middle-aged people who want to have a better life style after their retirement.

    I should keep following your site for more knowledge of financial management



  3. Andrew Hicks

    This is very important information put beautifully. Money is kind of a taboo, and some people even avoid knowing how much they’re worth because it will stress them out. That being said, it’s something you have to know to put your affairs in order! It’s simple to find out, and it organizes your entire financial life. Money is crucial, not a taboo!

  4. Nnanna Uma

    Hi Edward, Thank you for this inspiring post. I woke up one morning in January, and did a proper assessment. I caught a cold knowing that my financial networth was in the negative.
    For the last 2 months the assessment has paid off as the tides have turned. I am now consciously stepping up my assets over my liabilities.
    I believe everyone needs a financial net worth assessment and you’ve just inspired it.
    Thank you once again and have a nice day.

    • Edward

      Good job on taking action and making it a reality! You’re on the path to a better financial future, keep up the good work!

  5. Julie

    You have a wonderful site! You seem like you have a lot of knowledge on finances and online businesses. Unfortunately, I have been a victim of online business scams and lost some money but I want to check out Wealthy Affiliate. You have an awesome review of them and I am very intrigued to learn more. Thanks for all of your advice.


    • Edward

      Hi Julie, most of us come across scams before we stumble upon the real, legitimate opportunity. It makes the journey all the more valuable. We learn to appreciate the real deal even more after falling for all the scams.

    • I came, I read this article, I coqeunred.

  6. Cojo


    From what I can tell, you really know what you are doing! I think your site is very informative, very clean and organized, and easy to navigate. You are so right about most people not being prepared for their financial life. I know I wasn’t and now am in my middle 60’s and wondering how we are going to survive. I was glad to read when you started making money and how much. That gives me hope. Great Site!

  7. tatihden

    Now that you mentioned it, I have not done a calculation of my personal net worth in like never ever. I couldn’t agree more with you; I didn’t learn about finances at home or school.
    This post is very informative. if colleges could link students to resources like what you offer or introduce courses that help students understand how to manage their finances, then we will have more successful people in the society.

    • Edward

      Glad you liked it! This website was indeed started with the goal of providing personal finance education that is lacking in formal education.

    • Edward

      Glad you liked it! This website was indeed started with the goal of providing personal finance education that is lacking in formal education.

  8. Bernd

    Hallo Edward,
    thanks a lot for this article. It clarifies the mistakes about the items I have at home and cost me a lot of money in the time I bought them. Unfortunately they don´t count to my assets, which makes my balance sheet much worse. Your table with the examples is really helpful.

    • Edward

      Hi Bernd, one simple way to differentiate assets and liabilities is to see if they put money into your pocket, or take money out of it.

      If it generates cash flow for you (puts money into your pocket), it’s an asset. If you have to pay maintenance and it takes money out of your pocket, it becomes a liability.

  9. Travis Smithers

    I would totally agree with you that the school systems and the home environments do not teach the proper methods of handling or understanding money management.

    This post you created as the first part to others to get you on the right track is an excellent way to get started with making the right changes for financial freedom.

    You need to know where you’re presently at to move forward.

    Nice job on the update advice.

  10. Nathan

    Hey – these are some great tips. Thanks for sharing.

    I got quite a shock when I first calculated my net worth. But identifying what your financial health is like is so important for improving it.

    If you just look at what you have in the bank it might look reasonable healthy but you might have a heap of liabilities that make your true financial health not so flash.

    If you think your financial health is great when it actually isn’t you might end up spending money on things you really don’t need and worsening your situation further without really understanding that you are.

    So definitely important. Once you know where you are then you can make a plan to get to where you want to be.

    • Edward

      A lot of people don’t realize how much debts they have until they add up all the small ones. Others mistake liabilities such as car as an asset.

      You’re right, you can only plan where you want to be by knowing where you are standing. It provides a starting point for yourself and a goal to work towards.

  11. Ilyssa

    I like this post…it is very helpful about a topic that can be intimidating. I had never looked into my net worth because it sort of scared me. Turns out I am not doing so bad!! I have some debt but have assets too. This is great information and important for folks to consider as they try and make sense of their financial situation.

    • Edward

      That’s great! You just have to work on reducing your debts and increasing your assets, and you are well on the way to financial freedom!

  12. Sally

    Hi Edward,
    So what do you do if your financial health check gives you a negative.
    I am working but putting myself through school to finish my chartered programme in procurement so my liabilities out weigh my assets and it all looks daunting at the moment

    • Hi Sally,

      If you’re still in school and are relatively young, it isn’t too much of a concern. Schooling is in itself a form of investment that will bring you higher income in the future.

      Try to see if there’s any way you can cut your debt. Start with the smallest debt first if you need momentum.

      The details are given in the following articles in this series.

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