Example
Input: $1M Assets, $400k Liabilities
Result: $600k Net Worth
Step-by-Step Guide
- Sum Assets: Add up cash, property, investments, and receivables.
- Sum Liabilities: Add up all debts, loans, and payables.
- Subtract: Assets minus Liabilities equals Net Worth.
What is Net Worth Calculator?
Net worth is the most fundamental measure of financial health. It represents the value that would remain if all assets were sold and all debts paid off immediately. For businesses, this is synonymous with 'Owner's Equity' or 'Book Value'. Tracking net worth over time provides a clear picture of financial progress, independent of income fluctuations.
How it Works
The formula is simple but comprehensive: Total Assets - Total Liabilities = Net Worth. Assets include cash, investments, real estate, inventory, and equipment. Liabilities include loans, mortgages, accounts payable, and credit card debt.
FAQ
Should I include my home?
Yes, list it at current market value, but ensure the mortgage is listed under liabilities.
What about depreciating assets?
Cars and equipment should be listed at current resale value, not purchase price.
Is negative net worth bad?
For startups or students, it's common. For established businesses, it indicates insolvency risk.
How often to check?
Quarterly reviews are standard for businesses; annually for individuals.
Liquid vs Total Net Worth?
Liquid net worth excludes hard-to-sell assets like real estate, measuring immediate cash availability.
Conclusion
A positive trend in net worth is more important than a high income. High earners can have negative net worth if their spending and debt outpace their asset accumulation. Regular calculation helps identify debt reduction opportunities.