How to Determine Your Net Worth: Is it High, Low or Average?

Real estate investors, like everyone else, should be aware of their net worth. This value is extremly important because it allows us to gauge if our complete financial value is increasing or not. The average American doesn’t know how to save money, and typically has a very low net worth; many people even have a negative net worth! While it may seem obvious to many of us, the average guy simply can’t put a cap on wasteful spending (going out for drinks, buying cars that lose value, etc.) in order to buy assets that actually go up in value (like real estate, securities, etc.), and thus increase their net worth.

Simply put, net worth is your total assets minus your total liabilities

How to Determine Your Net Worth

Your Assets

The first step in calculating your net worth is to determine the total value of all of your assets. Add the value of the following:

Liquid Assets: cash, checking & savings accounts, money market accounts, CDs, savings bonds, cash value of insurance policies
Securities: (use current market values) stocks, bonds, mutual funds
Non-Marketable Investments: annuities, IRAs, tax shelters, pension plan equity
Hard Goods / Durables: cars, bikes, motorcycles, mobile homes, furnishings, furniture, electronic and other equipment, collectables, jewelry, furs
Loans Receivable: money owed you
Real Property: house, condo, rental property, commercial property, land, other real estate

Your Liabilities

Tally all of your liabilities . . . I know this part is much scarier for many of us!

Mortgages & Home Loans:

- Credit Cards: Determine the balance due on all of your cards
- Credit Installment Plans: Determine the remaining balance on payment plans for vehicles, furniture, equipment, mobile homes, home improvement loans
- Cash Loans: the value of any cash loans outstanding
- Insurance Policy Loans: any loans against your insurance policy
- Any Notes Payable
- Taxes Due: on income & property

Now, just subtract the liabilities from the assets and you’ve got your net worth.

You can use our net worth worksheet to help organize your work.

Compare Your Net Worth to that of Others

Note: By using computer software like Quicken or Microsoft money, you can make this task much easier. You can even watch your net worth on a month to month or week to week basis with very little work. I highly suggest using one of these to do your bills and calculate your assets and liabilities!

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.