This page may contain links from my partners. I may receive a small commission if you make a purchase through a link, as an Amazon Associate I earn from qualifying purchases.. Please read the disclaimer and privacy policy for more information.
Calculating and tracking your net worth is just another metric you can use to get to know your financial situation and better prepare yourself for life and the future you want to have.
No more stress about money!
I will help walk you through everything you need to know about what exactly is net worth, how to track it, the formula for net worth and why knowing your net worth is worth the annoyance of doing some math!
Also, find me FREE net worth tracker spreadsheet in my resource library!
- Related: 6 Tips to Start Changing your Money Mindset
- Related: My Budgeting Philosophy
Table of Contents
What is Net Worth and Why you Should Track it
The formula for net worth is simple:. Assets – Liabilities = Net Worth
But what does this actually mean? Net worth is calculating how much wealth an individual has. The formula takes everything you have of monetary value (assets) minus everything you owe or all the debt you have (liabilities).
Tracking your net worth can be very valuable because it paints the picture of your entire financial situation. It gives you an accurate representation of your wealth and will help you set feasible money goals.
Monthly, quarterly or even yearly tracking can help you see your growth over time and show you all this effort to save money is worth it!
How to Track Your Net Worth
Luckily for you, I’ve made a fantastic FREE net worth tracker spreadsheet you can try out right now! Creating your own net worth tracker spreadsheet (or using mine) is going to be the easiest and best way to track net worth.
If you’re not about spreadsheets and excel/google sheet documents I also made this cute printable for you to manually track your net worth, in my resource library! It’s free! You just have to be a part of my email list!
Step 1: What does “assets” mean?
Assets are basically things you own that have value.
You want to try and figure out what your assets are. Net worth is meant to capture EVERYTHING so make sure you are not missing anything.
In my net worth tracker spreadsheet for google sheets I’ve broken up assets into these four major categories.
- Cash
Cash will include all the money that is currently in your wallet. As well as, all of the money you have in bank accounts and each individual checking and savings account.
Related: The 4 Savings Accounts Everyone Should Have
- Investments
Investments are made up of all of your retirement accounts. 401(k), Roth IRA, Traditional IRA and any normal trading accounts you may have.
Note: Frequently asked question: Do you include 401(k) in net worth? Yes! Make sure you include your 401(k) in your formula for net worth!
- Property
Property is fairly self-explanatory. Do you own a house or rental property? Make sure to include it!
Here you are including the value of your property (not the mortgage). Meaning if you were to sell it right now, how much money could you get for it?
- Other Assets
Other assets are for anything else you may think of that doesn’t fall under the other three categories but has monetary value.
If you’re wondering why a car hasn’t been mentioned, this is up to you if you want to include it. I personally would recommend not including it as an asset however because although your car is worth money and you could sell it for money, it is slowly losing value over time.
All the other assets will grow and be worth more in the future but your car will unfortunately not.
Step 2: What does “liabilities” mean?
Next, we are going to do the exact same thing for your liabilities. Liabilities are things you owe money for, all your debt.
- Student loans
- Mortgage
- Credit Card Debt
- Car Loan
Step 3: Let’s do some math!
Now that you know all your personal assets and liabilities you need to assign them the correct value they have. This means opening up all your bank accounts to see the balances and finding out how much you still owe on your student loans.
If you are using my net worth tracker spreadsheet you don’t need to worry about the math because everything will already be calculated and figured out for you. However, if you are not using my tracker…. You gotta add it up yourself!
You want to add up all of your assets and subtract them from all of your liabilities. BAM! You have just calculated your net worth! That wasn’t too bad right?
Doing this is a fairly easy process and can give you a lot of insight. If you’re worried about your debt, tracking your net worth can be a lot of fun because as you pay each month your net worth will be increasing in the process!
How to increase your net worth
If you’re worried about whatever number you’re looking at, now that you’ve calculated your net worth, don’t be! There are several ways to help increase your net worth so don’t panic!
Increase your assets
Start taking saving a bit more seriously. Increasing your wealth takes time and with baby steps you can start getting in control of your finances. Come up with a savings plan and create a budget. What are you trying to accomplish? See where you are overspending and try to cut back in those areas.
You are conveniently currently reading a personal finance blog so I have a lot of great content about saving more and spending less to help you on your money journey.
Decrease your liabilities
Every payment you make towards your debt will increase your net worth. Learn to live a bit more frugally and stay on track with your debt repayments.
Get rid of the debt with the highest interest rate first!
Median Household Net Worth
Although I do not recommend you compare yourself to others, I thought I’d throw some statistics in here just in case anyone was wondering their net worth by percentile.
These statistics were pulled from CNBC and represent American household net worth. They were last updated in April 2021.
I’m using the median and not the average because it is a better representation of your typical everyday person like you and me. Averages are too thrown off by the crazy rich people hoarding all their money.
| Age of Head of Family | Median Net Worth (in the US) |
|---|---|
| Less than 35 | $13,900 |
| 35-44 | $91,300 |
| 45-54 | $168,600 |
| 55-64 | $212,500 |
| 64-75 | $266,400 |
| 75+ | $254,800 |
Final Thoughts
Net worth provides you with valuable information you can track over time.
I know I included some numbers for net worth in the US but it’s important to recognize you shouldn’t be comparing your financial progress to others.
Having a high or low net worth does not correlate with a high income or quality of life. Someone making $150,000 a year living in San Francisco and paying $3,500 every month in rent could have a smaller net worth than someone living in Phoenix making $50,000 a year and actively trying to save money.
Figure out what your goals are and what works best for you.
Just in case you missed it. Grab my net worth tracker spreadsheet for google sheets by joining my email list and getting access to my resource library!
What more do you want to read about? Send me an email or drop a comment below!
Want me to look at your budget? I do my best to answer all the emails I can!
Leave a Reply