Finance 101: Calculating & Understanding Your Net Worth

 According to Investopedia, a person or company’s net worth is “the amount by which assets exceeds liabilities”. More commonly put, net worth is the total value of your assets minus your debts. Net worth can apply to a business or a person. For the sake of this week’s Finance 101 article, we are going to be talking about personal net worth.

Everyone has a net worth, regardless of the value. However, if your outstanding debt is higher than the value you have in your savings, 401k or physical property, it is possible to have a negative net worth. The CGS Team is going to help you calculate and understand your net worth! By calculating your net worth now, and comparing to your net worth in the next 1, 2 or 5 years, you can begin to see the progress of your goals toward financial independence!

Calculating Net Worth

As mentioned earlier, your net worth is calculated by taking the total amount of you assets and subtracting by the total amount of your debt. Simple enough, right? The tricky part is making sure you are properly classifying your assets and liabilities. In simple terms, an asset is anything that has value (no, emotional value does not count). Here are some examples of assets to consider when calculating your net worth:

• Cash (in accounts or on hand)
• Current value of bonds, stocks, or other investments
• IRA, 401k or other retirement balances
• Current market value of your house or other real estate
• Current value of your car, boat, plane, or other vehicle
• Jewelry (diamonds, silver, gold)
• Furniture
• Collectables
• Any outstanding debts owed to you

A liability, or debt, is any financial obligation that you have or money that needs to be paid back to someone. Here are some examples of common liabilities:

• Home or auto loans
• Credit card balances
• 401k or IRA loans
• Student loans
• Outstanding taxes owed
• Self-employed or business debts

Remember: Assets – Debts = Net Worth

Understanding Net Worth

If you have calculated your net worth and realize that you are in the negative, don’t let that discourage you. It is perfectly normal for young (and older) women to have debt due to college loans, car loans, and credit card debt. You are not alone! According to Nerd Wallet, as of December 2014, U.S. household consumer debt averaged to $15,611 in credit card debt and $32,264 in student loan debt.


Not to mention, according to the U.S. Bureau of Statistics, US citizens averaged only 4.7% savings from their disposable income. When you have debt, it is extremely hard to save. You almost have to consider any savings you have as another payment towards your outstanding obligations.


Increasing Net Worth

There are two ways to increase your net worth: 1) reduce your debts or 2) increase your assets. Doing both at the same time will increase your net worth faster than doing just one or the other. Sure, it is easier said than done, but it is not impossible at all. You have to put yourself in a situation to succeed financially. This requires discipline, knowledge of your situation, and tracking your finances. If you have already calculated your net worth, then you are on the right track. This will give you an idea of what you really need to focus on.


If your debts are high, then work on decreasing that first. Knocking out those credit cards, student loans, or any other lingering debt as quickly as possible will help increase your net value in no time. Try paying off the highest interest debt first. Use any extra money you can without hurting your other obligations. Make sure you are paying at least the minimum payments on all other debts, until your highest-interest debt is knocked out; then move on to the next. This is called the snowball method, and it is said to be one of the best ways of knocking out debt quickly and efficiently.


If you already have your debts under control, start increasing your assets by adding more money to your savings, 401k or investments. Get yourself on a budget so you can see where certain expenses can be reduced to increase your income for savings. If you need assistance with a budget, check out the City Girl Savings Personalized Budgets, which comes with a net worth statement! For a low price, you will get the budget you need to get your net worth as high as you can!

It has been estimated that women will control over half of the world’s wealth in 2030. Let’s set ourselves up now to be one of those women! Take control of your finances and you will be well on your way! Do you have any questions about net worth? Leave your questions, comments or feedback in a comment below!

-The CGS Team



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