Having a net worth isn’t just for millionaires or billionaires. Everyone has one, rich or poor. Don’t be fooled into thinking that the term doesn’t apply to you because you aren’t rich. Here’s a simple formula to figure out how to calculate your net worth:
Assets are everything you own; Items that are 100% paid off and owned by you (house, car, and other physical goods). Cash is also considered an asset (checking, savings, retirement, any investment accounts are included).
Debt is everything you owe. This means credit card debt, student loan debt, mortgages, etc.
Net Worth = Assets – Debt
Simple as that.
If you’re young, you probably don’t have a ton of assets other than maybe some cash and a checking/savings account. It’ll be relatively easier for you to calculate because there aren’t many factors to consider.
If you’re older, usually 21+, you might find yourself with a car or mortgaging a house, and maybe (probably) some student loan debt. But even though you may have more factors to consider when calculating, everyone operates off of the same net worth formula.
A Quick Note to the Readers
Good on you for searching for this information and wanting to become more knowledgeable about your finances to better yourself. Whatever your financial goals are, know that you can reach them.
Millionaires and billionaires all started somewhere but were only able to maintain a positive net worth by practicing frugality and living on less than they make. Start your journey into building wealth and financial freedom today. The opportunity to increase your net worth is available every single day.
You can do it. The only question left is, will you?