Finding your net worth - it’s not just for celebrities

3 min read

Anthony O'neal
Finding your net worth - it’s not just for celebrities

One of the many ways you can track, manage, and visualize your current financial situation, is by calculating and understanding your net worth. Net worth, doesn’t just pertain to the celebrities we know and love, and serves as a great X marks the spot on the treasure map of your financial wellbeing.

When you know and understand your net worth, it makes figuring out the rest of your personal finance, where you are at, how far you have left in your goal, and how to improve, much easier. 

The essentials of net worth: what you need to know

To get the essentials, it’s important to understand that your net worth is the total of what you own, or have in your possession, minus what you owe others, including loans and credit card debt (yet another reason why all debt is bad debt - it decreases your net worth). So, you can easily determine your net worth by adding up your total value of assets (cars, homes, investments and investment properties, and cash) and totaling up your liabilities (loans, credit cards, mortgages) and taking assets - liabilities = net worth. 

Why is understanding your net worth important? 

Your net worth gives you a pretty accurate picture of where you stand financially and what steps you can take to improve. The easiest way to think about net worth is you can look at it as a way to measure your progress towards your goal of financial security, independence, and stability. As a motivator for reaching your goals, and using your net worth as a mile marker in a sense. 

What net worth tells us about our finances

When you’re trying to manage your income, you use a budget to figure out where your money is going, where you may need to cut expenses, or possibly increase income - net worth can be looked at like a big-picture budget. It shows you how everything looks together and really highlights the need to eliminate debt. There are two important things that happen when you target debt in your finances 

  1. Frees up your income 
  2. Increases your net worth 

Which are both incredibly positive outcomes of reducing debt. No matter what you need to do to get out of your debt, you should really make an effort to reduce that to zero and you’ll find your financial situation improved significantly. 

Your goal when calculating net worth is to use that number to accurately prepare your financial planning, give yourself a financial cushion in case there is an emergency, and overall improve your personal finance. If you own a business, personal net worth is separate from your business net worth, but they can be calculated the same way.

Breaking down net worth into assets and liabilities 

In order to figure out your net worth accurately, you’ll need to know what are considered liabilities and what are considered assets. Both factor into the equation of calculating your net worth, but there are differences in how they affect your net worth. 


These are things you own and have a positive effect on your net worth. Assets are things like cash, homes, cars, commercial bonds, savings bonds, household items, stocks, recreational vehicles, personal property, commercial property if you are a business, universal life policies, investment accounts, 401k and other retirement savings among other assets. With assets however, there are two more categories, liquid and illiquid assets. 

Liquid assets

This is money that’s easily accessible - like the money in your bank account it can be easily withdrawn and used for purchases. 

Illiquid assets

These are assets that cannot be easily converted into cash and tend to be more tangible objects than say money in a bank account or investment account. They are typically things you might sell for a monetary value and there are usually few buyers for these items. 

Assets and liabilities can be a bit tricky when you’re talking about things like your car, because the car is considered an asset because it can be turned into cash, but the loan you may have on your car is considered a liability. 


In contrast to assets, liabilities are what you owe to other people like the real estate mortgages, student loans total, auto loans total, personal loans, total credit card debt, college or student loans, and really any other outstanding debt you may have - these are the not so fun side of finances but they are essential for understanding your current situation and your overall net worth. This is why it was mentioned earlier that taking the time to reduce your liabilities (debts) to zero will significantly increase your net worth and free up your income to then invest into retirement or build your savings account. 

The lower your liabilities are, the higher your net worth and free income you have to invest back into your financial stability and independence. If you’re wanting a quick and efficient way to reduce your debt, it’s a good idea to use the snowball method

How to find my net worth:

Alright, so you know what net worth is, how it can give you the overall picture of your personal finance and stability, and how it can show you what your next steps are to improve these things, but what is the net worth calculation? I covered it briefly in the introduction of the article but I’m going to break it down into actionable steps. This calculation will also let you know whether you have a negative net worth or positive net worth - in other words whether your assets are higher than your liabilities or whether you need to make serious cuts to your liabilities in order to turn your negative net worth into positive.

Step 1: Make a list of your assets and total them up 

In order to actually compute the equation, you need to find out first what the value of all your assets are. Let’s take a look at an example and really break it down. 

When totaling up your assets you want to make sure you’re adding up their value not what you have left to pay on them - for example if you want to add up what your home is valued at not just what you owe on it or what you bought it for. Let’s take a look at a common example of what adding up your assets looks like in this step

  1. Checking account balance: $6,000 
  2. Savings account balance: $15,000
  3. Vehicles: $24,000 
  4. Retirement accounts: $ $56,000 

Total assets: $101,000 

Once you have made your list of assets you can then add them all up like we did and use this as your assets balance in the equation to calculate net worth. The next step is to calculate your liabilities. 

Step 2: Make a list of your liabilities and total them up 

In step two we’re going to do the same thing we did with your assets but with your liabilities. This is the section where you will take into consideration the amount you owe for certain assets, such as your home mortgage and your vehicle, instead of just the value of the item. Let’s take a look at a common example of what adding up your liabilities looks like in step 2. 

  1. ALL credit card debt: $5,000
  2. ALL vehicle loans: $15,000
  3. ALL medical expenses: $3,000

Total liabilities: $23,000

Alright, now that we have our assets and liabilities, it’s time to do the net worth equation to see the whole picture. 

Step 3: The net worth equation 

Now that you know your assets and liabilities, it’s time to subtract liabilities from assets. We’re going to use the numbers from step 1 and step 2 to figure out the net worth. 

Total assets - Total liabilities = Net worth 

$101,000 - $23,000 = $78,000 

What’s important to clarify is that your net worth is not your net income. Your net worth is simply a number that serves as a marker to where you are in your financial journey and how stable your personal finance is - the higher your net worth the better. Essentially a high net worth means you have more income than you do liabilities or debt, which means more income freed up and less going to expenses. 

The FDIC has a fantastic online resource that breaks down all your assets and liabilities, allows you to enter an amount you have (or want to have) for each, and it will calculate your net worth for you! 

Where do you stand when it comes to average net worth?

You can also help your future financial planning by taking a look at data like average net worth by age, to visualize where you stand. Once you use the net worth calculator and determine where you are, take a look at the data:

Age of head of household - Average net worth

< 35 - $183,500

35-44 - $549,600

45-54 -$975,800

55-64 - $1,566,900

65-74 - $1,794,600

75+ - $1,624,100

Let’s Recap

It’s so important to understand that your net worth is not your net income. Your net worth is simply a number that provides you with information about your financial health and wellbeing, and helps you get the big picture of where you stand with your management of assets and liabilities. 

Assets are things that you own that add to your overall net worth, things like vehicles, cash, checking/savings accounts, retirement accounts, and valuable items in your home.

Assets can be further broken down into liquid and illiquid, which determines what assets are easily converted into cash and which are not easily converted into cash. Liabilities are things that you owe to others, things like vehicle loans, student loans, mortgages, etc. 

Calculating your net worth allows you to create a more accurate financial plan and understand your next steps for freeing up your income and reducing your liabilities (debts).

I’ve mentioned in previous articles that all debt is bad debt, and this is exactly one major reason why – debt is considered a liability and lessens your overall net worth. The more debt you have, the less income you have to invest in retirement, savings, and overall use to build your wealth. 

If you aren’t loving the idea of manually writing out all your assets and liabilities, totaling them up and calculating your net worth, the FDIC has a super helpful online net worth calculator. You enter amounts in each asset and liability category and it does the math for you.

So, regardless of your current financial situation or financial health, it’s important to calculate your net worth to see where you can improve and see the bigger picture of your financial stability.

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