The dictionary defines net worth as “the total wealth of an individual, company, or household, taking account of all financial assets and liabilities.”   

Most people will agree that the definition of net worth is simply: assets – liabilities = net worth.    

Now that we know what it is, why is it essential to track it?   

Well, it allows you to see your financial situation at any point and whether your wealth is increasing or decreasing. Tracking your net worth is important because it gives you a clear picture of your financial health and can help you make informed decisions about your money. Please know that it is very possible to have a negative net worth. This means that you owe more money than what your assets are worth. We’ll talk a little more about this later.    

Now, let’s take a look at how you can figure yours out. Are you ready? Ok… take out a piece of paper and a pen or pencil. Draw a line straight down the middle.    

On one side, you are going to write the word assets, and on the other, write the word liabilities.    

On the assets side, make a list of valuable items that you own… think bank accounts, investment accounts like 401(k)s, any real estate property that you may own, personal property such as cars, or other items that have value. Next to these items, write down their approximate value.

Here is an example of what this may look like (we’ll use easy round numbers for simple math):    

• Bank Accounts – $5,000    
• Personal Home – $300,000  
• 401(K) – $50,000   
• Car – $20,000   

At the bottom, you will write the total for all assets. In this example, we will have a total of $375,000. Nice!   

On the liabilities side of your sheet, make a list of your liabilities. Liabilities are the debts that you may owe. Next to them, write the balance so again, for easy math, in this example, we will do:

• Mortgage –  $210,000   
• Credit Card Debt – $5,000   
• Auto Loan – $10,000   
• Student Loans – $50,000   
• And that Home Equity Line of Credit you took out to fix up your house – $40,000   

At the bottom, you will write the total for all liabilities. In this example, we have $315,000. Ouch!   

Now, we have the numbers we need to calculate net worth. Remember, net worth equals assets minus liabilities.    

In the example, the assets total $375,000, while the liabilities amount to $315,000, resulting in a total net worth of $60,000. Not too shabby.    

Let’s say you calculated yours, and you didn’t like what you got. You got a negative number. This means that your debts exceed the value of your assets. Let’s flip my example and say you have a negative $60,000.    

Do not get discouraged. Many families and individuals are right there with you.

According to MarketWatch, one in five Americans has a zero or negative net worth.

You’re not alone in this journey. Instead of dwelling on it, get motivated to get that number into the positive. You got this! 

Here are a couple quick tips on how to improve your net worth: 

• Work to pay down existing debts
  
  Focus on developing a method to really pay down debt. Read a book, attend a seminar, or watch one of our debt reduction webinar recordings on YouTube to learn all about the process of taking control of and tackling debt.  WATCH: Financial Freedom: Your Path to Debt Free Living.
  
• Avoid taking on any new debt
  
  Put those credit cards away and try paying cash or use a debit card more. Even if only for a short time, this method can effectively help you avoid adding onto that growing debt pile and keeps you more conscious of spending habits. 
  
• Adjust your budget to emphasize saving
  
  Every saving opportunity can boost your net worth. Explore opportunities to increase savings like boosting retirement contributions, and opening a new account for emergencies or other long-term goals. 

Check to see if your financial institution has any tools or resources available to assist you with this process. At Triangle Credit Union, we have tools available within our online and mobile banking platform to help you track net worth, pay down debt and set savings goals.  Money Management within online and mobile banking can help you track your net worth as it grows, set budgets and even debt payoff goals.  Goal Builder is a tool that helps you set up and track savings goals within your Triangle savings accounts. This is great if you’re looking for an easy way to save more for emergencies, a new car, a house downpayment or any other long or short term goal.  

It’s never too late to better your financial future! If you’re interested in boosting your net worth, get started today!