Understand and learn to calculate your net worth
What is your net worth?
Simply put, your net worth is what you own less what you owe. Or, in other words, calculate your net worth by summing the value of all your assets and then subtracting the sum of any liabilities you have. E.g. The total value of your house, your car, any savings or funds in your bank account, shares you own and any other assets, LESS any debts – e.g. your credit card debt, mortgage debt, short term loans or any other liabilities.
Just because someone has a high net income, that doesn’t mean that they have a high net worth. They could have a number of liabilities that reduce their net worth.
Why it can help to understand your net worth
To get a better understanding of your personal finances, it’s can be very beneficial to get a solid understanding of your financial position. With a view of your net worth, you’ll understand your baseline and be able to get a better gage on your current financial position. Better still, once you have your baseline, you’ll be able to track your position over time.
- Understand your baseline.
- Determine if you have enough savings to cover emergencies.
- Better understand any debts you need to reduce.
- Track how you’re progressing over time.
How to calculate your net worth
There’s no major rocket science to this one. Rather, it requires that you take an inventory of everything you own and everything you owe. Once you’ve collated your list, determine the values of each asset and liability and subtract total liabilities from total assets.
Total assets – total liabilities = Net worth
Assets and liabilities to consider when calculating your net worth
When creating an inventory to calculate your net worth, consider the following when creating your asset and liability inventory.
- Your savings balance in your savings accounts.
- The balance in your checking/current accounts.
- Balances in any retirement accounts you have created.
- Superannuation balance(s).
- The market value of your home (if you own one).
- If you own any investment properties, the market value of the property.
- The balance of any share investment accounts.
- The market value of any cryptocurrency, gold, art, jewellery, or any other alternative assets that you own.
- The value of any transportation assets you own – cars, motor bikes, boats, etc.
- Value of your ownership stake in any businesses you own, or part own.
- The balance of any loan you have (mortgage, car loan, student loan, or any other loan).
- The value of any cash debt you may have.
- Any outstanding balance on credit cards.
- Tax liabilities you may have incurred that are outstanding.
- Any other debt you may have.
How Humaniti can help
Humaniti’s personal finance and budgeting app can take the hassle out of calculating your net worth and tracking it over time. When you connect your financial accounts, the total values of your assets and liabilities will be automatically populated for you on your dashboard. If you have other assets or liabilities, you can add the values manually. Once all your assets and liabilities have been added, Humaniti will automatically calculate your net worth and track it over time.
Check out this article to learn more about how Humaniti can help you manage your personal finances.
Humaniti is a personal finance and budgeting app, not a financial advise solution. This article is provided for general information purposes only. Consider seeking independent financial, taxation or other advice from a qualified advisor where you require assistance relating to your unique circumstances.