Quickly Calculating Your Net Worth

25. May, 2009 4 Comments

Out of curiosity, I decided to calculate my net worth. I thought I might as well share the process that I went through to determine my net worth, so that you could as well if you desired.

Calculating your net worth can be a potentially scary task, as it is going to require you to come to terms with exactly how much you owe. You might feel safe and secure in your home, but you may very owe more than your house is worth. Calculating your net worth will force you to address your financial situation. Yes, you may end up with a negative number. The first time I calculated my personal net worth, it was -$13,000.27!

Your net worth will provide you with a good overview of your financial health. You will be able to determine if you need to start working hard to repay debt, or if you’re sitting pretty comfortably. There is no magic number that you’re trying to achieve, but it will be a solid, firm number that you can look at.

In addition, this number is then something that you can track over time. It can be a rewarding motivational tool as you watch yourself climb out of debt and towards a positive net worth. It can remind you why you’re working so hard to save money for the future, so that you can live off your investments. You may set yourself a goal of a certain net worth, and every year you can watch yourself get that much closer to your goal.

How Do I Calculate My Net Worth?

There are two steps to calculating your net worth. The first, and most time consuming step, is to gather your financial information. You are going to need the following:

  • property value (if any)
  • vehicle(s) value (if any)
  • chequing account balance
  • savings account balance
  • savings certificates/bonds balance (if any)
  • RRSP contributions (if any)
  • investment total (if any)
  • mortgage balance (if any)
  • car loan balance (if any)
  • line of credit balance (if any)
  • credit card(s) balance (if any)
  • student loan(s) balance (if any)
  • family loan(s) balance (if any)
  • other loan(s) balance (if any)

Be conservative when estimating your property and vehicle value. While they may feel like a million bucks, they probably aren’t worth it. Check local listings in your neighborhood to get an accurate assessment of what properties around you are listing at. If in doubt, guess low. This isn’t a contest, or a feel good program. This is about accurately estimating your net worth so that you have a good understanding of the truth – not of your dreams or desires. Similarly, check craigslist and local newspapers for vehicles of your year, make, and model to see what they are selling for. Take an average or guess low.

An RRSP (Registered Retirement Savings Plan) is the Canadian vehicle for retirement savings. If you are American, feel free to substitute your 401(k) or IRA or Roth IRA or whatever you crazy yanks use to put money aside for retirement.




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4 Responses to “Quickly Calculating Your Net Worth”

  1. Tom 25. May, 2009 at 2:52 pm

    excellent post and very useful/simple spreadsheet, just stumbled upon your blog from the other countless Canadian PF’s blogs.. will definitely visit you regularly.

    [Reply]

  2. Matt Goulart 26. May, 2009 at 1:20 pm

    Awesome Tom! Thanks for dropping by. Glad that it could help you out, look forward to seeing you around!

    [Reply]

  3. mei 10. Aug, 2009 at 10:52 pm

    Can’t state enough how important the sacrifices that go into wealth creation are.

    Curious if anyone has caught this book yet? “The Richest Man in Town” by W Randall Jones. I’ve read half of it so far and let me tell you it is well worth it. Would like to hear what everyone else thought of it?

    http://www.richestmanintown.com

    [Reply]

  4. Donald 27. Aug, 2009 at 12:24 am

    Great site!

    [Reply]

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