Calculating your net worth is a simple and worthwhile endeavor, and should be done once a year to measure your progress.
For example, to calculate your net worth, you would need to add up the dollar values of all of your assets – usually consisting of your house, your cars, savings accounts, retirement accounts, CDs, cash, etc…, and your most valuable possessions (you don’t need to include your desk lamp into the calculations).
From that figure you then need to subtract all outstanding liabilities you may have, such as the remaining balance on your mortgage, your car loans, student loans, or credit card loans, and other debt. The dollar value remaining is your net worth.
Tracking your net worth over the years can be a valuable tool – it allows you to have a clear picture of where you are now and how your financial health is progressing. Another layer to the calculation would be assessing your liquid net worth, which would separate your assets between liquid and non-liquid assets.
For example, your house and your retirement plans, while being an important part of your overall net worth, are not liquid assets, while the cash you have and investments in your brokerage account are liquid.
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