How to Calculate Your Net Worth? Let’s make Cents.

Knowing how to calculate your net worth is a concept that encapsulates the total monetary value of a person or enterprise after accounting for expenses and income.

According to Investopedia, knowing how to calculate your net worth is, “the amount by which assets exceed liabilities. How to calculate your net worth is a concept applicable to individuals and businesses as a key measure of how much an entity is worth. A consistent increase in net worth indicates good financial health; conversely, net worth may be depleted by annual operating losses or a substantial decrease in asset values relative to liabilities.”

According to Dave Ramsey of the Dave Ramsey Show this is how to calculate your net worth: “Your net worth is your assets minus your liabilities. Anything you own, that can be turned into money, that’s an asset- minus what you owe.”

It is an idea that we tend to associate with high ranking business people and corporations, but how to calculate net worth, and getting real with sitting down doing it after you know how to calculate net worth can be useful for anyone.

For example, if your total income is $100 a month and your total expenses are $75 a month, then your net worth is $300 per year. Of course, that is a highly simplified example. Understanding the true value of all of your assets can be a challenge in a constantly changing economy.

In his segment on how to calculate net worth, Dave Ramsey notes that if an asset is not easy to turn into money, it is an illiquid asset. Assets that are easy to turn into money, he continues, are liquid assets. A good example of an illiquid asset is a home or a business that you own. These are things of value, to be sure. But turning around and turning them into cash would take time and effort. There is a valuation process that can be used to pin down the true worth of your illiquid assets.

What is my Net Worth?

Figuring out your personal net worth is easier than you might think. Of course, the more illiquid assets you have, the harder it’s going to be. Because liquidating illiquid assets is a challenge- the process of liquidating them actually takes some of their value away. But if we do not need to be extraordinarily precise, we can compensate by being conservative in our evaluation across a list of items. Below are the steps for how to calculating your net worth.

Step 1: What are my Tangible Assets to Include?

This number will include your retirement savings, your current holdings in checking and savings, and the total value of any stocks you may own as well as the value of your home (if you own it), automobiles, and valuables.

Most people do not count items worth less than an automobile. Of course, the value of cars and trucks varies widely. For our purposes, we might leave out anything worth less than $5,000.

Still, most people will want to assess the total value of all of their belongings. To do this, just make a list of everything you own, which you wish to include such as book collections, TVs, clothing and so forth. Then find comparable items on eBay. The sales prices on sites like eBay and Amazon are a good indicator of their true market value. Once you’ve got all the small items evaluated, add them together under the heading, “personal belongings.”

Your Go-to Guide to Understanding Tangible Assets

As we have already touched on, some of the items in your asset column are going to have some very obvious and specific values which you can count on to remain stable. But large illiquid items will require an estimate. If your home is the item in question, sites like Redfin and Zillow offer calculators that will give you a usable figure for your calculation. If you’re looking to put a number on your car, Edmunds and Kelly Blue Book are great tools.Calculate Home as Asset

Do not expect these numbers to be a perfectly precise measure. Different items are in more or less demand depending on where and to whom you are able to sell them. You may be able to sell your home for half its worth tomorrow, but getting the true liquid value out of it could take a year or more. That’s why we call these types of assets illiquid. The numbers you get from these calculators are estimates and should be thought of as such. As mentioned above, rounding these values down to the nearest $5,000 is a good way to avoid over evaluating your net worth.

Over valuation of how to calculate your net worth is a good way to get yourself into financial trouble, and so we strongly recommend against it.

For clarity, we advise you to make a list with the word “ASSETS” at the top. Below that, list all your asset items along the left column rather than lumping everything under one total sum. This lets you revise your net worth valuation so that you can continue using this information for a long time. Considering that it could take you a whole day to figure out your net worth, you owe it to yourself to organize this information in a useful manner.

Once your list is complete, write the word “TOTAL” down at the bottom and start crunching the numbers. Once you’re finished, you will have the total estimated value of your assets.

Step 2: What are Your Liabilities?

This part probably won’t be as fun as adding up the asset column, but it’s necessary to know how to calculate net worth. Here, you will need to list all of your expenses. These will include;

Large businesses and wealthy people do not include minor outgoing expenses like groceries, gasoline, and the like- but the rest of us probably should. We’d say, if you make less than $200,000 a year, these kinds of expenses are not negligible and should be included in your outgoing estimate.

Once again, you’ll want to organize your list clearly and completely so that you can go back and reference or revise the information later.

Net Worth Cheat Sheet

Step 3: Calculating Total Equity

Take a deep breath, and subtract the total in the debt column from the total in the assets column. The difference is your net worth.

Apply to Know how to Calculate Your Net Worth Formula for Individual (Total Assets – Total Liabilities = Net Worth)


Margret is 40 years old and owns a home that is worth $250,000. She owes $100,000 on her mortgage. Her car is a few years old, but it’s all paid off and is evaluated at $5,000. She has $1,500 in credit card balances, $20,000 in her 401(k), roughly $5,000 in savings, and $15,000 left to pay off on her student loans.


  • Home: $250,000
  • Car: $5,000
  • 401(k): $20,000
  • Savings: $5,000

TOTAL ASSETS: $280,000


  • Credit cards: $1,500
  • Student loans: $15,000
  • Mortgage: $100,000

TOTAL DEBT: $116,500

Margret’s Net Worth: $280,000 – $116,500 = $164,000

Do You Include 401(k) In Net worth?

Many people ask this question. As you saw in our example, Margaret did include her 401(k). It is a real asset to you and does count toward your net worth. So, yes- include it in your calculation.

What if I Have a Negative Net Worth?

That’s good news for Margret. She’s doing pretty well. Unfortunately, not everyone is going to come up in the black like Margret. After taking on a large sum of student loan debt, accounting for a mortgage, and not having reached the full income potential of whatever training and degrees one might have taken- many people will end up with a negative net worth.

When you take on a student loan, the financial institution that provides your loan is betting that you will use your training to achieve an income that will enable you to pay off your debt. The same is true of a mortgage broker, a car dealership and so on. What this means is that while having a negative net worth is not exactly desirable, it is not the end of the world, nor is it unusual.

Often times, all a person needs to get their debt under control is debt consolidation services. These come in a variety of forms. Their purpose is to place all of your debt into one monthly bill. This ensures that you will not get confused each month with dozens of different bills to pay.

How to Build Your Net Worth

While having a negative net worth is both common and manageable, other unexpected life events can throw a monkey wrench in your plan to pay it down. If you need a loan for medical bills, need help paying rent, wedding finance, or for any other unexpected expense- there are a number of financial services that can help.

Personal installment loans are designed to be easily manageable and can help you get your finances back on track faster and with greater reliability than you might do on your own. You can easily get personal loan online or cash loans online from a number of short term loan lenders.

Get Personal Loan Online

Short term loan lenders and other financial professionals understand that young earners are likely to have a negative net worth. It will not affect your credit as long as your payment history is in good shape. Personal installment loans and debt consolidation can be set up easily online for those who qualify.How can i get a Personal Loan up to 10k


Remember, discovering how to calculate your net worth is not a measure of your ability to produce or to earn more. It is simply a measurement of your current financial standing. And as any good economist will tell you, your earning potential is a function of your productivity- not your debt.


DL M has 21 years of professional writing for print and online media with 10+ years experience as a freelance fiction editor. Though he also occasionally delves into other topics of interest his specialty subjects include: current events, marketing, analytics, personal development, leveraging social media, SEO, business development, cloud computing, language, and politics.


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