Before we can do anything to help our finances, we have to understand our starting point and how to marry that with the goals we’ve set. I call this part taking inventory… It’s where we list out everything that we own or owe so we can see exactly what our true financial picture at this point in time looks like. Once we’re done with that we can work on our budget to circle back and see just what we’re doing well and where we could do better.
Since your net worth is just a snapshot in time there are really only two things we need to consider: assets and liabilities (a.k.a. debt).
Assets: These should consist of anything you own that has some objective monetary value. (Please don’t include your pets or family members here; they are valuable to you, but do not have objective monetary value.) Cash is an obvious one and it’s value is easy to calculate. Others may be harder to track such as your car value or an investment account whose value changes hourly.
Liabilities/Debt: This should include any money that you will be required to pay out in the future. Credit card balances, student loans, car loans, and mortgages are the most common examples of these.
What if it’s an asset AND a liability: You may run into a case where you have an asset that is also a liability, for instance a car or home with an outstanding loan. In these cases I prefer to list the monetary value of the car in the assets section and the amount I still owe on the loan in the liabilities section. Ultimately the two will offset each other in the ending total.
Here’s an example of a net worth summary form filled in.
HERE ARE SOME TIPS TO HELP YOU CALCULATE YOUR NET WORTH
Updating your net worth monthly: Since your net worth calculation only represents your net worth at a specific point in time, you may want to update it with some frequency. I prefer to update mine at the beginning of each month so that I can see what my financial picture looks like after our paychecks and mortgage payment have cleared.
Using Mint: I use Mint as a jumping off place for my net worth tracker. I have most of my investments set to update automatically there, but unfortunately there were some accounts that Mint either had trouble connecting with or that I couldn’t remember the passwords to. Keeping track of everything on a physical worksheet allows me to bring it all together, but using Mint saves me the time it takes to log into each account individually.
Valuing assets such as cars and homes: Homes have gotten easier to value these days. Zillow can provide you with a “Zestimate” in seconds and can even be automated to update in Mint. Cars take a few minutes longer as you will have to enter some information about your automobile into Kelley Blue Book’s value calculator (takes five minutes tops).
Written by: Lindsay Dell Cook
Lindsay Dell Cook is an accountant, turned writer and founder of Budget Babble. She lives in Philadelphia with her uber supportive husband, and enjoys taking their adorable mutt for walks or reading a good book while buried under a pile of cats.