What Is Total Net Worth? Understanding Your Financial Health

Your net worth is a snapshot of your financial health. It’s the value of everything you own (your assets) minus the total of everything you owe (your liabilities). Think of it like this: if you were to sell everything you own and pay off all your debts, the remaining amount would be your net worth.

A positive net worth means you own more than you owe. This is a good sign! It indicates that you are financially stable and have a cushion to handle unexpected expenses or investments. A negative net worth, on the other hand, means you owe more than you own. This can be a cause for concern as it might mean you have taken on too much debt.

Here’s a breakdown of how to calculate your net worth:

Assets: These are things you own that have value, such as:
Cash: Money in your checking and savings accounts.
Investments: Stocks, bonds, mutual funds, real estate, and other investments.
Real estate: Your home or any other property you own.
Vehicles: Cars, trucks, motorcycles, boats, and other vehicles.
Personal property: Valuables like jewelry, art, collectibles, and furniture.

Liabilities: These are the debts you owe:
Mortgage: The loan you took out to buy your home.
Student loans: Loans you took out to pay for education.
Credit card debt: Balances you owe on credit cards.
Auto loans: Loans you took out to purchase a vehicle.
Personal loans: Any other loans you may have taken out.

To calculate your net worth, simply subtract your liabilities from your assets.

Example:

Let’s say you have $50,000 in savings, a house worth $200,000, and a car worth $10,000. Your total assets would be $260,000. You also owe $150,000 on your mortgage and $5,000 on your car loan. Your total liabilities would be $155,000.

Your net worth would be $260,000 (assets) – $155,000 (liabilities) = $105,000.

Tracking your net worth is a powerful tool for managing your finances. It gives you a clear picture of your financial health and helps you make informed decisions about your money. By regularly calculating your net worth, you can identify areas where you can improve your financial situation, such as increasing your savings, reducing your debt, or making strategic investments.