# What Is My Net Worth? Calculating with Examples

Have you ever had anyone ask you where your net worth is? I highly doubt it, but it is an incredibly important question! First of all, what is net worth anyway? And why should you be concerned with what makes up your net worth number? These are great questions and will all be addressed in this post!

## How to Calculate Your Net Worth

This term is often thrown around, but very few people can actually tell you what their net worth is. Basically, your net worth is the total value of everything you own minus the debts you need to pay. Here is an example to show you how to calculate your net worth:

Assets

• House – value of \$175,000
• Car #1 – value of \$20,000
• Car #2 – value of \$10,000
• 401k – value of \$20,000
• Total Assets = \$225,000

Debts

• Mortgage – \$160,000
• Car #1 – \$15,000
• Student Loan – \$25,000
• Total Debts = \$200,000

Net Worth = Assets – Debts = \$225,000 – \$200,000 = \$25,000

In the example above, the total assets minus the total debts left a net worth value of \$25,000. Take a minute and calculate your net worth. It is a very important number to track regularly to make sure that you are continually increasing your value, rather than decreasing it as so many often do.

## So…Where Is Your Net Worth?

Do have any idea where your net worth is? I know that might sound like an odd question, but it is actually quite important if you would like to see your net worth number rise. Let me explain.

In the net worth example above, the young couple had four major assets: their home, two cars, and a 401k account. Which of these assets is rising in value? Well, chances are that the house will rise in value over time and the 401k should also yield a positive gain as the years roll by. These assets are helping to increase the total net worth value. The two cars, however, are likely not. The \$20,000 car will probably be worth about \$10,000 in four years and the \$10,000 car will plummet to \$5,000 or so. Over the course of just four years, the auto values will take the overall net worth down by approximately \$15,000.

Now, what if this couples’ net worth was split between a home, a growing business, real estate investments, a 401k, a high-yield savings account, and a couple of cars that were only valued at a total of \$10,000? Would you say that this spread of assets would yield a higher net worth return in the future? I would say certainly yes!

Many people today have absolutely no idea what their net worth is, let alone where it is, which is really a shame. If people simply took the time to understand the nature of their purchases and their overall assets, they could really increase their net worth and quality of life by a much larger margin than what they are today. Instead of slaving away at their jobs for 40+ years of their lives, they could spend wisely and enjoy a life of travel and freedom. All while continuing to increase their net worth!

## So…Where is My Net Worth?

It’s always good to be transparent, right? So you might be curious where my net worth is currently. After all, I’m the one sitting here on my sofa bossing you around about your net worth, so I should be leading by example right? Well, I am certainly trying. Without putting any numbers on my total assets or liabilities, here is my net worth layout:

My Assets

• House
• Car – 2001 Honda Civic
• Truck – 2001 GMC Sierra (currently selling)
• 401k
• High Yield Checking/Savings

My Liabilities

• Home Mortgage

The 2001 GMC Sierra is a truck that I bought for an amazing deal, drove around for a while, and now I’m trying to sell for more than I bought it for. And, my car is so old and has so many miles that it is no longer depreciating in value. I could still easily get \$2,500 for it today, which is exactly what I bought it for two years ago. Finally, the home mortgage is nearly gone. I plan to pay off the remaining balance in the next couple of months, which is very exciting! The next step in growing my net worth is to by some real estate. Not only will the rental properties increase in value, but they will provide me with a monthly income from my renters.

So, I leave this question with you now: Where is your net worth??

Money

#### AUTHOR Derek

My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.

1. I’m a big proponent of Mint, and I also just started using Personal Capital 67 days ago. The reason I know it was 67 days ago is because I’ve been thrilled with my net worth increase since starting to use Personal Capital, up 9.7% in just the last 67 days! Of course it helps that my net worth is still hovering just above 50k, but I spent the better part of a decade with a negative net worth due to a hugely underwater mortgage. The analysis of my investments that Personal Capital provided was very helpful to me to know how little diversification and low-risk I was actually invested in. Looking forward to watching my net worth grow, and never see negative numbers again!

• Glad to hear your enthusiasm Jover! I absolutely love to see my net worth rise as well. In just the last two years or so, I have seen a net worth increase of 6 figures! It is crazy how fast it can grow when you’re intentional about it.

2. I do publish net worth occasionally and will probably do that again once we get this latest rental property squared away. Will you take a mortgage on an investment property or try to pay in cash? I’d love to not have any debt, but mortgages are a necessary evil. I’m afraid it would take so long to pay in cash that property values might be too high at that point, but maybe that’s flawed logic.

• Hi Kim. Thanks for the comment! I have decided that once I pay off this mortgage I will never go into debt again. That means I will be buying my first rental property with cash. Thanks to having no debt and multiple sources of income, I should be able to save up enough to buy a conservative single family home by the end of next year. Buying with cash will only get easier from there with the added rental income. Using cash for home purchases is definitely possible, but you’re right, you have to wait a bit to make it happen. Stay in touch and we’ll compare experiences!

3. I seem to be two brackets ahead for my age. Wonderful. It’s currently quite easy for me to know this, I just look at my numbers in YNAB. The only physical asset I own which has value to speak of would be my car, but as I bought it second-hand for just 2k euro I’m not sure it holds that much value, except for the sentimental one I carry for it.

• Hi Nina! So if your car is your biggest asset, how can you be two brackets ahead for your age? I’m assuming that your 401k is the majority of your net worth? Wouldn’t you count that as an asset?

4. The majority of our net worth is in our investments – both retirement and non-retirement. When we graph it, you can quickly see which months were good for the market and which were bad because our net worth swings with each rise and fall of the market. For some, this is stressful, but for us, we just focus on the long-term and let the market do its thing.

• Yeah, that would be pretty stressful for me. I hate the downward swings. But, like you said, I just have to remind myself that the down market is actually good for me because I am buying shares at a discount for the long-term investment. Ideally though, in the future I want to invest in real estate. The swings will be almost non-existent, and the income will be steady.

5. Hi Derek,
I know this is an older post but I was searching for information about underwater mortgages and this one popped up.I have tried applying for Harp and refinancing through my bank but I am not eligible because the value of my house has dropped over half and people are selling properties for nothing all around me.

I am thankful though my Net worth is in positive numbers thank goodness for my 401K and my 1 year Emergency Fund. Just keep plugging away at the Principle even though my house will probably never get back to the initial price?

• Hi Nicole. Dang you sure are digging into your personal finances lately! Good for you! Way to be active with your money decisions!

How do you feel about your neighborhood? Do you think it will rise in value in the next 2-3 years? If yes, then it’s probably best to stick it out and keep paying down the mortgage at this point. However, if it’s going down in value with no hope of coming back then you might want to start talking to your bank about your options to get out.

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