Net Worth Calculator

Net worth is a basic calculation to show the relationship of your debt to your assets. A positive net worth is always a good thing, because it shows you have a financial cushion in case of hard times. A negative net worth could indicate that you might be having financial difficulties.

Also important is the direction of your net worth — whether it has gone up or down from year to year. Most young homeowners have a very big loan and a very small net worth, at least until their house rises in value or they pay off some of their honking big mortgage. Five years later, they may have some paid-up equity in the home, less debt and a higher net worth.

On the other hand, consider someone who has a high income but lots of debt. That person may well have a lower net worth than our young homeowners — indicating that they are burning through their high income.

Bankers like to look at borrowers’ net worth to gauge their broad financial condition. Bankers also like borrowers with a positive net worth because it shows how much they would have if they had to sell everything — in other words, what kind of financial cushion they have.

Net worth is a snapshot in time of everything you own minus everything you owe. Let’s say you have:

• $100,000 in a 401(k) retirement plan
• $2,000 in a regular savings account
• $1,500 in a checking account
• a home worth $250,000

You’d start by adding up the value of all those assets — in this case, $353,500.

Now let’s look at what you owe:

• $5,000 in credit card bills
• $20,000 for a car loan
• $5,000 in student loans
• $150,000 on your mortgage

Add them all up, and you owe $180,000. Your net worth, then, would be your assets ($353,500) minus your liabilities ($180,000), or $173,500.

Your net worth will increase as you pay off debt. Knock out that $5,000 credit card tab, and your net worth goes up to $178,500. Pay off the mortgage, and your net worth would rise to $323,500.