Net Worth Calculator overview
The notion of a person's net worth is fairly simple: How much do you have, minus how much you owe. In more technical terms, it's your net assets minus your net liabilities, or debts.
Net worth is considered to be one of the more reliable indicators of one's financial status, more so than mere income. Consider: a person may be earning $150,000 a year, but if that income is swallowed up by debt payments on $2 million in liabilities, that person may be in a more precarious position than someone earning a mere $50,000 a year with little debt.
At the same time, net worth is not an absolute guide to one's financial health. Not all debt is the same. A person with a $500,000 mortgage may be in a better financial position than someone with a similar income with $50,000 in credit card debt, because the mortgage represents a home with durable value. Someone with negative net worth because they're starting a business may actually have a bright financial future.
Still, your net worth is a good place to start to get a snapshot of your financial situation and to see where you stand. A close look at what makes up your net worth can also identify areas of strength or weakness you can work on to improve your financial situation.
It's a good idea to calculate your net worth on a regular basis, at least once a year. That gives you a picture of where you're going financially and whether you're on track to meet your goals. Declining or stagnant net worth may be a sign you need to make some changes.
Using the Net Worth Calculator
The Net Worth Calculator has two main sections: your assets and your liabilities (debts). It also has fields where you can enter the rate at which you expect your assets and liabilities to increase or shrink over the coming years.
Most of the fields should be self-explanatory. If you're unsure or need additional information about any of them, you can obtain a definition and explanation by clicking on the name of the field in question.
The calculator will project your net worth out to 10 years from now, based on the rates of growth you expect for both your assets and your liabilities. Note that you can enter negative figures for these as well; if you expect to shrink your debts over time, you can account for that by entering a negative percentage for your annual growth in liabilities.
You can also use the green triangles on the sliding bar to play around with these figures and see how fluctuations in either the growth or shrinkage of your assets or liabilities will affect your net worth 10 years from now.
Enter the current values for your home, automobiles and other assets, not what you originally paid for them. Note there are separate fields under the liabilities section to enter what you still owe on these things.
For things like jewelry and household items, enter your best estimate if you have not had them recently appraised.