How to calculate your Net Worth



The formula for calculating your Net Worth is straightforward: sum all your Assets (what you own), and deduct all the Liabilities (what you owe):


 We can add that there is a certain art in assessing Assets and Liabilities:

– sometimes, we use goods that are only partially paid for. As such, we need to assess how much we paid and own (Asset value) and how much we still owe (liability value).

– sometimes, it’s easy to identify the value of an asset or liability: the value can be reported by our bank or financial institution, by our supplier, etc.

– sometimes, we need to adjust the value of our Assets: many assets lose value over time. We need to take that into account every year. Other assets might have a high emotional value for us, but we need to record the most realistic market value, even if it is less than we dream of!



To support such analysis and track our Net Worth’s evolution over time, we use an Excel tool you can download here.



The Net Worth  provides:

  • a measure of how wealthy you are. It is much more significant than your income: people can have high-income jobs and be broke at the same time.
  • a system to record your Assets and Liabilities on a monthly and/or annual basis,
  • an insightful snapshot of how you efficiently “save/store” value,
  • an indication of where you stand along your financial journey
  • a visualization of your financial goal (specific value)
  • a compass to help you choose and monitor your Financial Workouts (costs optimisations and the set-up of new income streams).
  • Data to further calculate your Financial Freedom Number (when your annual passive income covers your annual expenditures).

There are several ways to benchmark our annual Net Worth quickly:

1) we can compare our current Net Worth with our Net Worth forecast.

2) we can compare our current Net Worth with our Financial goal and see where we stand.

3) we can use the rule of thumb proposed by professor Stanley (author of the Millionaire Next Door): if our Net worth> (our annual income * our age)/10, then we are on the right path.

(Example: ($64,000 *36 years)/10=$230,400; if our net worth is equal to or over $230,400, we are on the right path).

4) we can compare our actual Net worth with the average and the median net worth of people of the same age living in the same country/region.



If you are not already doing that, take action, download the Excel tool and track your Net Worth.

Keep it up! Sweat your Assets

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