Net Worth Calculator: How To Calculate The Net Worth Of An Individual
Reading Time: 4 minutes In this guide, I will provide a simple net worth calculator so that you can easily calculate your net worth.
To simplify, net worth is the amount of the items you own (assets) minus what you owe (liabilities).
Knowing the net worth of an individual is useful in seeing whether you’re on the right track to building wealth.
But there is a bit more to it than that. Read on to better understand how to calculate your net worth.
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What Is Net Worth?
If you have a large negative net worth, it may be time to reassess some of your loans and other spending.
Simply add all of your income and assets and then minus all of your expenses and liabilities. The net total will be your net worth.
How To Calculate The Net Worth Of An Individual
Calculating the net worth of a person involves writing down everything you own into two columns: assets and liabilities. Assets minus liabilities equals your individual net worth. (assets – liabilities = net worth)
What Are Assets?
Assets are items that you own that are valuable. These can include your house, cars, stocks, savings accounts, and retirement accounts to name a few. Assets are items you could sell for cash or are cash.
When calculating the value of an asset, it should be the amount of money you can get in the current market for the item, not what you think you should get. Markets change and sometimes what you paid for an item is not what you can reasonably expect to get when selling. This is especially true for cars.
Related: Can you lose money in a Roth IRA?
What Are Liabilities?
Liabilities are items that you’re financially responsible for. These include your mortgage, car loan, student loans, and other financial debts.
Liabilities are debts that you have in the form of loans. Liabilities lower your net worth so it’s best to get rid of them as soon as you can.
Use this net worth calculator to find out where you stand!
How Much Net Worth Should You Have By Age
According to a Federal Reserve Survey of Consumer Finances, here are the average net worth’s in the USA based on age:
| Age Tier | Average Net Worth |
|---|---|
| Younger than 35 | $11,100 |
| 35-44 | $59,800 |
| 45-54 | $124,200 |
| 55-64 | $187,300 |
| 65-74 | $224,100 |
| 75 and Older | $264,800 |
| All Families | $97,300 |
These net worths are the averages for Americans but aren’t necessarily what you should aim for. Americans are known to underfund their retirement savings.
If you’re looking to retire comfortably, your annual cost needed to live varies by state. Once you’ve determined which state you’d like to retire in, you can work backward to find out how much you need to save per month to retire.
Related: Got debt? Learn how to pay it off fast.
What Is Tangible Net Worth?
Tangible net worth is your net worth as calculated above but incorporates intangible items into the calculation. Intangible items are intellectual property, copyrights, patents, and other items you can’t physically touch.
Tangible net worth mainly comes into play if you own a small business and are trying to get a loan. Banks often want your real net worth calculation which would not factor in intangible assets.
Calculating Tangible Net Worth
Tangible net worth is calculated by subtracting your liabilities and intangible assets from your assets. (assets – liabilities – intangible assets = tangible net worth)
Tangible vs Intangible Assets
Below I’ll go over some common tangible and intangible assets. Please note that intangible assets are not common when calculating individual net worth. Intangible assets mainly come into play when someone owns a business.
Tangible assets include:
- Real Estate
- Personal Property
- Cash
- Investment Accounts
- Retirement Accounts
- Motor Vehicles
Intangible assets include:
- Trademarks
- Intellectual Property
- Patents
- Goodwill
Final Thoughts On Personal Net Worths
Knowing your individual net worth is a great starting point for understanding your building wealth. It can be used to determine whether you’re heading in the right direction or if you have a lot of debts weighing you down.
The great news is that if you find yourself with too many liabilities, you can sell those items or find other ways to get out from under them. The simple act of downsizing your house of moving to an area with a lower cost of living can have a significant effect on your net worth.
Related Articles:
- What is Your Liquid Net Worth?
- The Real Effect Of Paying Extra On A Mortgage
- 100 Inspiring Rich Mindset Quotes To Motivate You
- Income Streams Millionaires Use To Get Rich
- How to Create a Personal Balance Sheet
Want somewhere to track your money across all accounts? Grab this free financial dashboard to track your savings, retirement, net worth, and more!
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