How to Determine Your Net Worth

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How do you determine your net worth? Your net worth is a simple formula. It's a simple calculation. All it is it's your assets versus your liabilities. So really what it is, it's the amount of equity you have plus the amount of cash.

Assets

To calculate your net worth, what I would do is I would get out a spreadsheet, or if you have some kind of accounting or bookkeeping software or even a financial calculator and start taking inventory of all your assets and putting them down in your asset category.

For example, if you have a house worth $500,000. You have a car worth $30,000. You have furniture... you make a rough estimate, let's say there's $40,000 worth of furniture in there. And then, any other things like miscellaneous, like jewelry, and then you look at all your investments.

Do you have investment properties? They go on the asset side. Do you have any investments like stocks or bonds or any other kind of investment? And do you have any cash? So that's all the assets that you have.

Liabilities

Next, you look at the liabilities on the other side. Those are the negative things. Let's see what your mortgage is. I said you had a $500,000 house. Let's say the mortgage on that is $200,000. Your car is worth $30,000 and maybe you only owe $10,000 on it.

And for your furniture, you don't owe anything on that. Your investments were all bought outright, so there's no liability there. Maybe you have a line of credit that you used for your investments.

Net Worth

Then what you do is you add up all of the year assets, you add up all your liabilities and you subtract your total liabilities from your total assets, and that gives you your net worth.

Businesses

If you have a business where you're running all your transactions through for your real estate deals. What you would do is the same kind of thing inside your business. And then what's left over is what's called shareholder's equity. That would go on your asset side as well, depending on if you're the sole owner of that business or not.

The same goes for any other business that you own. If there's shareholders equity in that, and you're the main shareholder or a partial shareholder, whatever shares you own in that other business need to be calculated. That goes into your assets as well in the asset category.

So what you're trying to do is you're trying to figure out your net worth. Cause what you want is you want a starting point for when you get really involved in real estate and you can watch your net worth grow.

Okay? So let's get your net worth figured out and calculate it.

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