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## 4 steps to calculate your net worth

### 1. Understand assets and liabilities

Mostly, your net worth is simple subtraction: your assets minus your liabilities.

Assets are all of your stuff that has value, such as savings, investments, your home and vehicles. Don't forget to include any significant pieces of art or jewelry.

Liabilities are your debts, including mortgages, credit card balances and loans of any kind.

To determine your net worth, you'll need to start by thinking about any assets and liabilities you have.

### 2. Determine your assets

To take inventory of your assets, think hard and make sure you include everything in your portfolio that has value. Don't forget about retirement savings acounts (like Roth IRAs or 401(k)s) and investments.

You can include physical items like your car, although you may to leave off other things unless they have substantial value.

For example, your \$5,000 comic book collection would be worth adding to the roster of assets!

### 3. List your liabilities

After sorting out all of your assets, it's time to move on to liabilities.

Start writing down everything you owe money on, from credit card balances to loans.

Don't include routine monthly expenses, but do factor in any debt that is currently outstanding.

If you have a lot of different debt sources, consider taking out a debt consolidation loan to simplify your payments — and save big on interest.

### 4. Do the math

Now that you've taken stock of your assets and liabilities, add up each category. Then, subtract the total liabilities from the total assets.

This will leave you with your current net worth. It's that simple.

Here's an example: Tom has savings of \$25,000, investments of \$50,000 and a vehicle worth \$10,000. That means he has \$85,000 in assets.

He also has a credit card balance of \$5,000 and a student loan of \$20,000 — liabilities totaling \$25,000.

So, Tom's net worth is \$85,000 (assets) minus \$25,000 (liabilities), which equals \$60,000. So, he has net worth of \$60,000.

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## Next steps: How to increase your net worth

Once you determine your net worth, you may wonder how you can improve it and your overall financial health. It's all a matter of decreasing your liabilities and increasing your assets.

Start thinking about how to get rid of obligations, such as by consolidating or paying debts. Bolster your assets by investing in real estate, stocks and so on.

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#### Disclaimer

The content provided on MoneyWise is information to help users become financially literate. It is neither tax nor legal advice, is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. Tax, investment and all other decisions should be made, as appropriate, only with guidance from a qualified professional. We make no representation or warranty of any kind, either express or implied, with respect to the data provided, the timeliness thereof, the results to be obtained by the use thereof or any other matter.