As we wrap up our finances in 2022, it’s time to check our Net Worth calculations. This is a quick way to see how you’re doing financially. Note that if you have a large sum of money in stocks, your net worth may have declined since 2021. For many retirement funds, these are long-term investments where our best option is to hold the stocks until closer to our later years.
You can make a spreadsheet (Excel, Numbers, or Google Drive) that tracks your progress. If your finances are straightforward, you can do this on a sheet of paper with a calculator.
1) List your assets: bank accounts, investments, real estate (physical property), iBonds, etc. We wouldn’t suggest including your golf clubs or TV here as they aren’t likely to help you with financial independence. You can include your car’s trade-in value. Add up all the cash values as your total asset value.
2) Subtract your liabilities: debts, credit card balances, student loans, mortgages, and any money you owe to your family, etc. Subtract this column from your total assets value above.
That’s it. Assets – Liabilities = Net worth.
What does it mean? If it is negative, you are upside-down financially. You have accumulated more debts than assets. We encourage you to look at the tips for financial success (pinned) and the baby steps. If you are not already following a budget, it’s time to get one and start following it.
If it is positive, that’s great! Let’s work on growing it by spending less than you make and investing wisely every month.
