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Your net worth is the value of your assets minus your liabilities, which is everything you own minus everything you owe. Getting a handle on your net worth is like giving yourself a financial report card. When you count all of your assets and liabilities, you can understand what is working in your financial life and correct what is not.
How to Use the Net Worth Calculator
To get the most out of Forbes Advisor’s Net Worth Calculator, we recommend entering data that accurately reflects the value of your assets and liabilities.
Understand your assets
To get an accurate reading of your net worth using this calculator, you need a good idea of the value of your major assets.
Assets are nothing more than goods that you could exchange for money. Stocks, bonds, and other investments are assets, just like your house, car, and even money in your checking account.
Some assets are more liquid than others, meaning you could sell them faster at a price that reflects their current value. Cash, for example, is the most liquid asset. But other assets are less liquid, meaning it would take time and effort to sell them, and you might not get exactly what you thought they were worth.
For each type of asset in our calculator, enter an estimate of what you think the asset would be worth if you sold it today. Don’t worry about how much debt you might have on something like a car loan or mortgage. We’ll cover those in the “Your Responsibilities” section.
Annual asset growth rate
The annual growth rate of the value of your assets can be very difficult to obtain. Our calculator allows you to calculate the value of four different types of assets: real estate, personal property, investments and cash.
Each would likely have a very different annual rate of return, making it difficult to determine the correct overall annual growth rate. This calculator defaults to a growth rate of 7% to reflect somewhat conservative returns for equity-intensive investments and real estate. You may want to reduce this amount even further if you hold large holdings of cash or personal property with low or no rates of return.
Understand your responsibilities
Liabilities are unpaid financial debts you owe or the negative side of your personal balance sheet. In our calculator, you will only have to enter the outstanding amount of each type of liability that you owe.
Over time, some liabilities slowly turn into assets. This is what happens when you pay off your mortgage and gain equity in your home. In other cases, paying off a liability simply means that you have no further obligations to the entity that lent you the money, such as reducing your credit card balance.
Annual growth rate of liabilities
The annual growth rate of your liabilities could be as difficult to determine as the growth rate of your assets.
Some liabilities, such as a car loan or a home loan, have terms and interest rates that you have already agreed to. Other liabilities, like student loans and credit card debt, are more open. If you continue to increase your balance or only make small regular payments, your liabilities may continue to increase.
If you have a mortgage and a car loan, and you repay each regularly (in accordance with the terms of your loan agreement), your liability growth rate should be zero. If you have a credit card balance to which you add nothing and pay it off monthly, your liability growth rate should also be zero.
But if you have student loans or credit card debt that you don’t pay off regularly, think about the interest rates and balances you’re holding in order to enter a rough estimate of what the growth rate might look like. of your liabilities.
Net Worth Calculator FAQs
Net worth is the sum of all your assets and liabilities at any given time. A positive net worth means that the value of the assets you own is greater than the debts you owe. Negative net worth is when the amount you owe in liabilities exceeds the value of your assets.
What is the average American net worth?
The average net worth of all American families was $746,820, in 2019, according to the Federal Reserve. If that amount seems somewhat out of touch with your financial reality, it’s because average measures of things like net worth can be skewed by a small number of people with gigantic personal fortunes. A midpoint measurement is more realistic. The Fed found that the median net worth of all Americans in 2019 was $121,760.
Why is net worth important?
Net worth is important because it gives you an idea of the health of your personal finances. If your assets outweigh your liabilities, you’re probably doing well financially. But if your debts outweigh your assets, you should try to reduce your debts.
The fact that net worth doesn’t depend so much on the size of your income but rather on how you use it also makes it a useful tool for comparing people’s financial statements.
You might believe that someone who earns a high salary is better off financially than someone who earns a relatively low salary. But the best comparison would be each person’s net worth. After all, someone with a high salary may have more debt that actually gives them less net worth than someone with less means who uses what they have more wisely.
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