How to calculate your net worth — and what to do with that information

Net worth is a snapshot of the value of what you own less what you owe. If you have a negative net worth, then you owe more than you have available to you. A positive net worth means the value of what you own is greater than the amount that you owe.

Knowing your net worth and monitoring it over time lets you evaluate the financial effect of your spending, saving and borrowing activities, such as increasing retirement savings or paying down your credit card debt. Learn how to calculate your net worth so that you can make financial adjustments or a new financial plan as needed.

How to Calculate Your Net Worth

To calculate your net worth, you’ll first need current figures for everything you own and everything you owe.

Collect the following information:

• Real estate ownership papers
• Current registered and non-registered investment statements
• Current values on recreational vehicles and automobiles
• Bank account statements
• All mortgage statements
• Credit card statements
• Student, automobile, bank loan, credit line and personal loan statements
• Life insurance statements

Once you have all your information, you can begin calculating your net worth by starting with a list of all of your assets, which are anything of value that you own that increases your net worth.

Take the following steps to find out your net worth:

1. List Tangible Assets

Tangible assets are items of value with physical properties. In other words, these are assets that you can touch.

List and assign dollar values to all tangible assets such as:

• Residence
• Vacation home
• Rental properties
• Investment real estate
• Furniture
• Cars
• Sports or vintage automobiles
• Recreational equipment such as boats, snow machines or RVs
• Art
• Jewelry

Add up the dollar value of all of these items to find your total tangible assets.

2. List Equity Assets

Equity assets are your ownership interests in businesses, including stocks held in retirement accounts.

List and assign dollar values to all equity assets such as:

• Stocks
• Variable annuities
• Limited partnerships
• Business interests
• Any retirement accounts such as a 401k or IRA

Add up the dollar values of all items to find your total equity assets.

3. List Fixed Income Assets

Your fixed income assets include long-term investments that pay interest on a fixed schedule.

Fixed income assets include:

• U.S. government bonds and securities
• Municipal bonds
• Corporate bonds
• Bond mutual funds

Add up the dollar values of all items you own in this category to find your total fixed income assets.

4. List Cash and Cash Equivalents

Cash equivalents refer to short-term accounts and investments that can be cashed in for emergencies. Include all the cash sitting in your checking and savings accounts, as well as all other easily liquidated money market funds.

Typical assets in this category include:

• Checking account balances
• Savings account balances
• Money market mutual fund balances
• Certificates of deposit
• Other cash reserves

Add up the dollar values of these items to find your total cash and cash equivalents.

5. List Other Assets

You might have other assets with a cash value. Check your original paperwork or the most recent statements to find your current principal asset values.

Other assets include:

• Fixed dollar annuities
• Trust deeds
• Cash value of insurance policies

Add up the dollar values of items in this category to arrive at your total other assets.

6. Sum Up Your Total Assets

To determine your total assets, add up the totals of each asset category:

• Tangible assets
• Equity assets
• Fixed income assets
• Cash and cash equivalents
• Other assets

7. List Your Liabilities

Next, list your liabilities. A liability is money owed by an individual or business that decreases net worth.

Liabilities include:

• Home mortgage
• Other mortgages, such as vacation property or rental property
• Home equity line of credit
• Home equity loan
• Auto loans
• Bank loans
• Student loans
• Personal credit line balances
• Balances on credit cards
• Personal loans
• Other debts or money you owe

Add up the dollar values of each of these items to get your total liabilities.

8. Apply the Net Worth Formula

Once you’ve listed all of your assets and liabilities, calculating your net worth is straightforward. Use the final total assets amount you got from step six and the total liabilities amount from step seven to come up with your net worth:

Total Assets – Total Liabilities = Net Worth

Calculating your net worth annually is an important part of financial planning because it helps you assess your financial progress and how well you’re meeting your financial goals. It might also show you opportunities to make changes. For example, you might have more money in cash than you need for an emergency fund; you could invest that money for retirement or education savings. On the other hand, if updating your net worth annually shows your liabilities increasing more than your assets, it could be time to revisit your budget and create a debt repayment plan.

From GoBankingRates.com: What is my net worth?