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Your net worth is the value of your assets minus your liabilities, a.k.a. 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 up all of your assets and liabilities, you can understand what’s working in your financial life and fix what’s not.
How to Use the Net Worth Calculator
To get the most out of Forbes Advisor’s net worth calculator, we recommend that you input data that accurately reflects the value of your assets and liabilities.
Understanding Your Assets
To get an accurate read on your net worth using this calculator, you need a good idea of the value of your major assets.
Assets are nothing more than possessions that you could exchange for cash. Stocks, bonds and other investments are assets, but so are things like your home, your car and even the money in your checking account.
Some assets are more liquid than others, meaning you could sell them more rapidly at a price that reflects their current value. Cash, for instance, is the most liquid asset. But other assets are less liquid, which means it would take time and effort to sell them, and you might not get exactly what you thought they were worth.
For each asset type in our calculator, enter an estimate of what you believe the value of the asset would be if you sold it today. Don’t worry about how much outstanding debt you might owe on something like a car loan or a mortgage. We’ll cover those in the “Your liabilities” section.
Annual Asset Growth Rate
The annual rate of growth in the value of your assets can be very tricky to get right. Our calculator lets you tabulate the value of four different types of assets: real estate, personal property, investments and cash.
Each of these would probably earn a very different annual rate of return, making it challenging to settle on the right overall annual growth rate. This calculator defaults to a growth rate of 7% to reflect somewhat conservative returns for stock-heavy investments and real estate. You may wish to lower this even more if you have substantial holdings in cash or personal property with low or no rates of return.
Understanding Your Liabilities
Liabilities are outstanding financial debts that you owe, or the negative side of your personal balance sheet. In our calculator, you’ll simply enter the amount outstanding on each variety of liability you owe.
Over time, some liabilities slowly transform into assets. That’s what happens as you pay off your mortgage and earn equity in your home. In other cases, paying off a liability simply means you have no further obligation to the entity that lent you money, like working down your credit card balance.
Annual Liability Growth Rate
The annual growth rate of your liabilities could be as challenging to determine as the growth rate of your assets.
Some liabilities, like a car loan or a home loan, have set terms and rates of interest that you’ve already agreed to. Other liabilities, like student loans and credit card debt, are more open-ended. If you keep adding more to your balance, or make only minimal regular payments, your liabilities may continue to grow.
If you have a mortgage and a car loan and are paying off each on a regular basis (per the terms of your loan agreement), the growth rate of your liabilities should be zero. If you have a credit card balance that you’re not adding to, and you’re paying it off every month, your liability growth rate should also be zero.
But if you have student loans or credit card debt that you’re not paying down regularly, think about the interest rates and balances you hold in order to enter a rough estimate of what your liability growth rate might look like.
Net Worth Calculator FAQs
Net worth is the sum of all your assets and liabilities at one moment in time. Positive net worth means that the value of the assets you own is higher than the liabilities you owe. Negative net worth is when the amount you owe in liabilities exceeds the value of your assets.
What Is the Average Net Worth of Americans?
The average net worth of all American families was $746,820, as of 2019, according to the Federal Reserve. If this amount seems somewhat disconnected from your financial reality, that’s because average measures of things like net worth can be distorted by a small number of people with gigantic personal fortunes. A median measure 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 a sense of the health of your personal finances. If your assets outweigh your liabilities, you’re probably doing well financially. But if your liabilities outweigh your assets, you should work on reducing debt.
The fact that net worth doesn’t depend so much on the size of your income but more on how you use it also makes it a helpful tool for comparing people’s financial states.
You might believe that a person earning a high salary is better off financially than someone who makes a relatively modest one. But the better comparison would be each person’s net worth. After all, a high salaried individual might have greater debts that actually gave them a lesser net worth than someone with less means who uses what they have more judiciously.
