Your net worth number can tell you a lot. It is the number that shows you where you are on your financial path, and if you use it wisely, you can also use net worth as a compass to help you achieve larger financial goals. Homeownership is one of the greatest drivers of wealth-building – homeowners have 40 times the net worth of renters.
For aspiring homeowners looking to start their homeownership journey, understanding their net worth is the first step to understanding what their financial options are. And, for those further down their homeownership adventure, tracking their net worth can help them see how homeownership is affecting their financial well-being.
How to Calculate Net Worth
Figuring out where your net worth is requires some simple math. You can follow along below to determine your current number, or you can use this net worth calculator.
You’ll take a sheet of paper and list out all your assets, combining their value. Assets include things like automobiles, 401(k)s, savings accounts, and even nice jewelry.
Then, in another list, identify all your debts. These are anything that you owe on – student loans, car payments, and credit card balances, for example.
Then, subtract the total number of your debts from the cumulative number of your assets. Ta-da! That’s your net worth.
Your net worth number is just a number; it’s neutral. It’s neither good nor bad without context. Really, your net worth at any moment is just a way of understanding where you are.
However, your net worth number will help you to assess your financial future. As Gary Keller writes in SHIFT, the first step in any decision is to get in the right mindset. You can use your net worth number to help you set goals, track your investments, and ultimately measure how far you’ve come.
Looking for More Homeownership Resources?
Head over to the Your First Home webpage for freebies, including information on how to build out your real estate dream team, and for your clients, a resource on how to determine their homeownership criteria.