There are so many ways to keep track of net worth, and there’s no one “right” way to do it. I find that a quick back-of-the-envelope calculation works for me.
One of my first data points I have is from January 2007, when I had a -$4,300 net worth. As of December 2009, my net worth is around $51,000. So I’ve have increased my net worth by roughly $55,000 in 3 years, or around $18,000 per year. I’m proud of what I’ve done, but if I get the position that I’m hoping for I promise to do better. (Just in case the Universe is listening!)
(By the way, this is the first time I’ve updated my net worth since 2007. Oops. What kind of a personal finance blogger am I?! With this super simple calculation, I should be better about that going forward.)
I don’t include the book value of my elderly Honda or my personal possessions because (1) they are not worth that much and (2) excluding non-investment assets gives me a more realistic view of my net worth. I’d rather see that I have a $10,000 net worth with only my investments rather than a $12,000 net worth that includes my car and personal belongings.
Currently, I don’t own a home. If I did, I would likely put the home equity value (market value less book value of mortgage debt) in Assets and reevaluate that value once or twice a year for simplicity’s sake.
So here’s how I calculate my net worth:
Assets:
- Bank Checking & Savings Accounts + Money Market Fund = Total Cash
- Equities + Fixed Income = Total Retirement Investment
- Cash + Retirement Investment = Total Assets
Liabilities:
- Credit Card Balance* + Student Loan Balance = Total Liabilities
Net Worth:
- Total Assets – Total Liabilities = Net Worth
*I pay off my credit card bill every month but the bill is due in the middle of the month, not at month-end. I calculate net worth at month-end, so whatever balance I have accumulated up to that point should be reflected in the net worth.
How do you calculate your net worth? Does it differ from the approach I use?
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Wow, that is such a great testament of all your hard work! It gives me hope that I can have a great positive worth in two years. I calculate mine once a month, but I don't include my car because I probably won't get anything for it and plan to run it into its grave… mentally I just don't want to add that $1500 to my worth.
I also calculate end-month. My net worth is really easy to calculate right now since I'm 25 with few assets or liabilities (no house, no car). It's surprising that you haven't calculated your NW for so long – I can barely wait til the end of the month!
I make savings / investing goals (instead of NW per se) because I don't plan on paying my student loan off sooner than I have to (I have 0% interest). I've known that my net worth is increasing, but it hasn't been the most valuable metric for me.
Similar, but I use networthIQ to keep it automated. I don't count my car or possessions, or various short term funds I'm only going to spend within months (gifts, travel)
Good luck with your continued job search!
I'm a strong follower of the KISS principal (Keep it simple stupid). So I use the same calculation!
(All financial data) + House equity – (all debt, including mortgage).
Thanks way it's nice, quick and fun!
With me I also have financial accounts that I control (529s, UTMAs and the like), but I'm not going to include those figures… After all, it's not money I'm going to use from my household.
Thanks for revealing your net worth, I'll have to do that too at the end of this year…
KISS is a great principle! I don't know if I'll do a NW update every month… probably just once a quarter would be enough.
I track my finances using Microsoft Money and it gives a net worth calculation for you. I do list our cars and my weddings rings as assets because in a true emergency, they could be sold for cash.
I like to calculate my net worth using NetWorthIQ (http://www.narrowbridge.net/2008/10/my-net-worth-... but I also like the personal balance sheet approach: http://www.narrowbridge.net/2009/03/personal-bala...
I'm almost there with you except that Equities and Fixed Income for me are not considered Retirement Money. I consider it cash except "less liquid." I do have an IRA and I'm considering a 401K and that's about it for retirement. But Stocks are fun (totally said as I snap my suspenders!). I consider it play money that I plan to use in 3-5 years.
All my equities & fixed are in retirement accounts, so that's why they are retirement investments.
But if I open a taxable investment account, then I'll categorize those stocks/bonds in the taxable investment (a 3rd line item in my assets section).
I think it is good to have a mix of retirement and non-retirement equity investments. Who knows, you might make it big and be able to retire early, but will be stuck waiting on retirement funds until you are in your sixties. I put a big chunk of my income into retirement, and a smaller but significant amount into a personal stock account.
That's an excellent point. I do plan on opening a taxable account sometime in the future (within 5-7 years), but my first priority is to max out tax-advantages accounts before I start a taxable account for retirement.
Yeah, I took my car & my engagement ring off. I'm not planning on getting rid of either one, so I felt like it just wasn't worth it to have them on there, even though they added $20,000 to my net worth together.
nice! I am negative 100k about…ugh not making any progress on this undergrad loans but at least my car is paid off…sometimes i wish i went to a state school
Bschool usually require 100% loans, right? Unless you get a merit scholarship. I've heard that for "professional" schools (i.e. med, law, biz, dental), very few grants are available because the expectation is that you'll make enough money after graduation to service the six-figure debt.
This is not entirely true. You do have to pay close attention to the details upfront. I did get my MBA and I took out loans. When I did my taxes after graduation and a new found intereste in personal finance, I found that the scholarship money and money I received for being a graduate assistant covered my tuiton and books at a private instittion. I unnecessarily accpeted the loans. The price I paid for being uninformed.
I have had serveral friends attend law school on scholarships.
Many of these programs may not be publicized much. Ask questions and you will find some money.
Thanks for the information. I will keep this in mind (and of course do more in-depth research) when it comes time to go back to school.
I calculate mine differently. I ignore my credit card amounts (I also pay it off monthly), and don't factor in my chequing account to my net worth, since I don't expect to keep any money in that account at the end of the month (it goes to savings or my student loan – I don't get that 0% interest rate!).
I only count my savings vs my student loan towards my networth at the moment (I don't have anything else that could count!).
If you have a home and a mortgage (or two) in the calculation, I would keep the ASSET value as the purchase price rather than the appraisal…After the housing meltdown, we all know that equity isn't equity unless the house is sold. So the calculation would reflect what you've paid down on the mortgage, not what value you might achieve through a sale of said asset. I update my NW once a quarter.