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Is calculating your net worth complicated for you? Let me simplify it for you!
Basically, you can calculate your net worth by adding up all your assets and subtracting your liabilities.
Your net worth it’s a quick snapshot of your financial health.
If you want to retire early, your net worth can be a good indicator to check if your wealth is moving in the right direction.
If you track your net worth over time, it shows you the progress you’re making towards your financial goals – whether it’s paying off debt, saving for an emergency fund, or becoming financially independent.
Why? If you pay off debt, your net worth will reflect that. If you save for an emergency fund, your net worth will go up.
You have started investing, and your investments increase in value? Your net worth will increase.
What is Your Net Worth?
Your net worth is your assets minus your liabilities.
What is very important: your net worth has nothing to do with income. It factors only in the part of your income that you save, invest, or use to pay off debt.
If you spend most of your income, it’s hard to increase your net worth. To effectively increase your net worth, you should increase the gap between what you’re earning and what you’re spending.
[Related Read: How I Live On Half My Income – And You Can Too!]
Calculating Your Net Worth
To calculate your net worth, you add up all your assets and subtract all your liabilities.
So a practical way to do this would be:
- List all your assets: your house, your car, all your bank accounts, stocks, bonds, retirement accounts.
- List all your liabilities: your mortgage, your car loan, your student loan, your credit card debt, any other debts that you have.
- Assets – Liabilities: now we subtract your liabilities from your assets, and you have your net worth!
You should put a date to your net worth calculation, to check where your financial health is going over time.
Ideally, you want to calculate your net worth over a certain period.
Depending on your personal preference, you can check your net worth yearly, quarterly, or monthly.
Personally, I calculate my net worth every quarter. When I do that it allows me to see changes in my net worth over time, which motivates me to keep going with spending less, saving more, and investing.
[Related Read; Grant Cardone’s Net Worth & Earnings Revealed]
Things To Pay Attention To
Your House
When you’re tracking your net worth, and you’re trying to track your house, you will find that this is both an asset and a liability.
You’re having a house that’s worth $200,000 and you have a mortgage that currently has $150,000 outstanding.
Your mortgage started at $200,000 but $50,000 is already paid off towards the principal.
You will add $200,000 to your asset calculation since that is the worth of your asset. Also, you will add $150,000 to your liability calculation, since that is the liability you have for that specific asset.
Your Car
The same can be applied to your car. If your car is currently worth $15,000 and you have a loan of $5,000, you add the value of your car to your assets and your car loan currently outstanding to your liabilities.
Please pay attention here, as it doesn’t matter for which amount you bought the car.
What matters is how much money it’s currently worth, so how much could you get when you wanted to sell the car in the short term?
[Related read: average net worth in the Netherlands]
It’s Very Personal
Don’t pin your personal value to your net worth, it’s not the ultimate guideline for determining whether you’re a financial success or not. It’s a helpful indicator, but it doesn’t give the whole picture.
It’s just a number.
For example, my net worth was very negative when I was graduating in the summer of 2017. After that, I had a mini-retirement to South America, and my net worth went even further down the line.
I didn’t care, because this was a lifetime opportunity that I might not ever get again. Plus I’ve learned so much about myself and the way I perceived myself.
I knew that when I would enter the job market, my earning potential was high.
Somewhere in
It’s important to check your growth, to see it improving from one year to the next.
Currently, I have a positive net worth that is in the low five digits, and I’m very content with it. I don’t own a house, I don’t own a car (I lease one), and I didn’t pay off my student loan yet.
Improving Your Net Worth
Don’t panic if your net worth is currently negative, that’s also what I experienced until recently. This is not something you should focus too much on.
I mean, I didn’t even know what 6, 7, 8, or even 9-figures would look like. I still don’t know what it feels like, but that will change in the future.
What you should focus on is increasing your numbers.
You can do this by either paying off your debt or increasing your assets. What will help you do this is to
If you master your spending, you can be sure that you increase your net worth. How can you do that?
- 25+ Incredible Easy Ways to Save Money
- 15 Essential Frugal Living Tips [How To Be Frugal]
- How I Cut My Electricity Bill In Half – And You Can Too!
- How To Save Money In The Summer And Still Make It Memorable
Another great way to increase your net worth is by increasing your income.
- You can increase your income by starting a blog and starting to focus on affiliate income
- You can increase your income by getting more passive income and starting to invest in peer-to-peer platforms
- You can increase your income by selling stuff you already have: 13 Things To Sell To Make Money Fast
- You can increase your income by asking for a raise at work
- Or you can increase your income by getting a promotion
Tracking your net worth is a simple and easy way to see where you’ve come from and where you’re going, in terms of your financial health!
I encourage you to calculate your net worth today, using the below net worth worksheet.
Download your net worth sheet here!
Are you tracking your net worth?
Marjolein is a financial consultant who has built over €4,000 monthly passive income and saves over 70% of her income. Read Radicals’ inspiring story, from stuck in the 9-to-5 to loving life. Feel free to send Radical a message at the bottom of this page
I am of course! And I do it automatically, via YNAB. Since net worth for me is the sum of every transaction up until now, I could potentially look at my net worth every day.
I do include my home in there, and if I were to own a car (currently I don’t) I will include the value in my NW as well and depreciate every month.
I do not include things like my phone and laptop since I don’t intend to sell them any time soon.
Hi B, I’ve started using YNAB a few weeks ago. Are you putting in all transactions manually? As for my app, it says that I need to have a US bank account in order to update automatically.
When you’re having a house I can imagine your net worth will be more exciting, but for me currently it’s just adding my investments and savings, and subtracting my student debt. That’s it. For things like my phone and laptop I also don’t bother, mostly I use them until they’re ready to be replaced.
You’re correct, can’t do auto import with Dutch accounts. However, I find that entering transactions is fairly easy. I just do them on the fly via the app or sometimes once per week going through all my accounts (bank, credit card) to reconcile and capture every transaction.
There’s something to be said for manual transactions. They make you think more, and that is usually a good thing with money.
Perfect, thanks for confirming that. Yes I also believe that it’s a good thing to do it manually, it will make you more aware. Personally I’m a little lazy, so whenever things can be done automatically I don’t mind too much 😉
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Thanks for your kind words Kim!