There are many ways to measure your financial health. One of the best is your net worth. This looks at whether your overall assets are worth more or less than the debts you owe — and by how much.
So, if you’re wondering what your net worth is — and whether it’s considered good or not — read on to find out.
Why Is Knowing Your Net Worth Important?
Knowing your net worth helps you get a snapshot of how you’re doing financially, and whether certain goals such as putting your kids through college, buying a house, retiring, etc., are within reach.
It also helps you think about your personal finances as if you were a successful business, according to Matthew Grishman, principal and wealth advisor at Gebhardt Group, Inc.
“Successful business owners often measure the success of their company by how consistently they grow their net worth — or, in business accounting terms, their balance sheet,” he said. “So regular self-checks are critical.”
Grishman added that seeing a positive net worth that grows over time is an indication of good financial health.
“A negative net worth can be painful to see,” he said, “but it’s not the end of the world.”
How To Calculate Net Worth
Calculating net worth is pretty simple. You can use a pen, paper and calculator — or you can do the work in a basic spreadsheet. Here’s what to do.
Step 1: List Your Assets
Start by listing every liquid asset you own. “Liquid” means you could sell the item for cash with relative ease. For example, bank accounts, stocks, bonds, precious metals and equity in real estate or vehicles are all considered assets. Your great uncle’s vintage baseball card collection may be a bit tougher to accurately value and quickly sell, so it’s best to leave out these types of items when calculating net worth.
Next, approximate the value of each asset. Grishman suggested logging into your bank, retirement and brokerage accounts to check the current value.
“Use websites like Zillow or Refine to estimate the value of your home or investment property,” he said.
Grishman added that you can check websites such as CarGurus or Edmunds to estimate the value of any cars you own.
Once you have an itemized list of your assets, add everything up to see the total value.
Step 2: List Your Liabilities
Now make a similar list of every debt you owe, also known as liabilities. These can include credit card balances, car loans, student loans, a mortgage, child support or alimony. Importantly, Grishwald said you should not include regular living expenses, such as utilities, groceries, rent payments, dining out or other bills.
Be sure to list the entire balance owed, not just the monthly payment amount. Then add up all of your liabilities to get the total.
Step 3: Subtract Liabilities From Assets
Finally, subtract the total value of your liabilities from the total value of your assets. The resulting number is your net worth. Here’s an example:
Say your assets include the following:
- Checking account: $500
- Savings account: $8,000
- Retirement account: $125,000
- Brokerage account: $30,000
- Equity in your home: $20,000
Your total assets would equal $183,500.
Now, say your liabilities include the following:
- Credit card balance: $1,000
- Student loan: $10,000
- Mortgage: $150,000
Your total liabilities would equal $161,000.
By subtracting your liabilities from your assets, you get a net worth of $22,500.
Is Your Net Worth in Good Shape?
Grishman emphasized that the “right” net worth is personal and based on the amount of money required to support yourself and the lifestyle you desire. There’s no perfect number to aim for.
“Generally speaking, a younger person in their 20s or 30s should have a smaller net worth than someone in their 50s or 60s,” Grishman said. “Older people have had more time to earn and save, as well as pay down debt obligations like car loans and mortgages.”
That said, it can be helpful to see what the typical net worth is among people in different life stages.
Every three years, the Federal Reserve conducts its Survey of Consumer Finances. In 2019, the most recent year available, the Fed found that the median household net worth among Americans was $121,760.
Here is the median net worth broken out by age group:
- Under age 35: $14,000
- 35 to 44: $91,110
- 45 to 54: $168,800
- 55 to 64: $213,150
- 65 to 74: $266,070
- 75 or older: $254,900
It is important to note that this data was collected pre-pandemic, which means many households could have vastly different net worths following the financial turmoil that occurred in 2020-21. The 2022 survey, which will be released next year, should give us better insight into how American families were financially impacted by COVID-19.
“The key here is that if this is your first time ever calculating your net worth — or it’s something you have not done in a very long time — don’t focus on where you think you should be,” Grishman said. Instead, use this calculation as a starting point, and measure your progress going forward.
“If your net worth is going up over time and getting closer to what it needs to be to support you in the future,” Grishman added, “then you should feel great about your progress.”
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