Figure out your Net Worth
The simplest may to see how you are doing financially is to calculate your net worth. Don’t worry it’s quite easy. You can use a blanks sheet of paper or fire up that Apple IIe and get cranking in a spreadsheet program. By the way Financial Samurai has an Apple IIe in it’s orginal box if anyone is looking for one. Email him here if you’re interested.
Items needed:
- Balance of all checking and savings accounts
- Balance of all retirement accounts (IRAs, Roth IRA, 401K, 403b, etc…)
- Balance of your 1st, 2nd, 3rd mortgages (if you have any)
- Balance of any vehicles (car, boat, motorcycle, atv, RV, snowmobile, etc…)
- Balance of all other debts (student loan, credit cards, personal loans, 401K loans, etc…)
The Research:
Now many of the things you own have a value to them? To get an accurate net worth you need to have an accurate value tied to each item. Let’s start with the house. There are a couple sites on the internet that can be used to estimate the current value of your home. They are Zillow and HomeGain. Now these do not take into account for upgrades and other items you’ve done to add value to the home, but they do steer you in the right direction. The next items you need to assign a value to will be your cars and toys. Use the Kelly Blue Book kbb.com to check the value of your car. You can look through the classifieds and other online sources to get a value of your toys.
The calculation:
- Add up all the assets you have. The assets are; the checking/savings accounts, the retirement accounts, the value of the house, the values of the cars, the values of the toys, and anything else that can be sold for money. The results are the total value of your assets. This might look like a good number, but don’t forget about all the liabilities still on the paper or computer screen.
- Add up all the liabilities. The liabilities are; the mortgages, the vehicles, and the debts.
- Subtract the liabilities total from the assets total.
- The resulting number is YOUR NET WORTH
- No, your calculation isn’t wrong. If the number was negative you are “in debt”
- If the number is negative you need to take a hard look at your situation. You can choose to remain in debt hoping money will fall from the sky, or you can take action. The choice is up to you. Below is my net worth, and yes I am in debt.
There are many different ways to increase your net worth. Only one way will be easy. The easy way is to win the lottery or avoid the cash advance. After reading J. Money’s article The $100 Scratch off Lottery Project I just don’t think it’s worth wasting time or money playing the lottery to increase your net worth.
Spend less than you make Utilize a written budget to help focus your efforts. I give some resources for budgeting help here.
Increase your income Get a second job, I recommend delivering pizzas. Sell items on Craigslist or Ebay. Start to do freelance work. Do anything that will bring more money into your household, just DO something because waiting for money to just appear at the door won’t work. If you need some ideas on ways to make more money, Phil from PTMoney has written a fabulous e-book called 52 Ways to Make Extra Money. If you sign up for his newsletter, you will get access to this free e-book.
Start a business The internet is making it very easy to start a business online. I’m sure you can perform some Google searches and find all the resources you could ever imagine about the subject. Just this morning Erik over at MoneyCrashers wrote a post about how he started his own business How I Started A Side Business. There are countless stories around the blogging community that can act as a catalyst for you fire up your engine and get moving on making more money.
I’m sure you can think of other ways to help out your net worth, but the ones listed above will work quickly to put more money into your pocket. Yes, you could invest in the stock market and 401Ks, but if you are in debt the single biggest action you can take is to get that number into the positive. Without debt you are in control of your money and only then can you build real wealth.
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Article by Jeff Kosola
DeliverAwayDebt is designed to help people along the journey toward "Debt Freedom". I use my battle against debt to demonstrate anyone with enough passion and motivation can blast away debt. My net worth is updated monthly and all my Pizza Delivery earnings are tracked. These are posted to demonstrate that YOU CAN eliminate your own debt. It will take some work, but nothing in life that matters is easy.
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Haha, funny. Left the Apple IIe back in Hawaii, but if interested, one can come out and pick it up! It’s in IMMACULATE condition with software too!
Good calculation on the official version of net worth, but my version is different. Essentially, “Your Net Worth Is An Illusion, Sorry To Spoil Your Delusion!” Only thing that matters is cash and of course all your debt.
How come u ain’t smiling in your pic Jeff?
Samurai´s last blog ..Someone Always Farts In A Crowd
HaHa don’t worry you are not spoiling any delusion I have. My reality is a mountain of debt to get rid off. Whether it’s measured in Net Worth (including the paper value) or Cash. The measurement is just an indicator of a problem that many of us have. Once you can understand the problem it becomes much easier to draft a plan to fix it. You can call it Cash worth minus debt, or I can call it net worth-as long as we are both trying to build wealth and have a better life the name and calculation just doesn’t matter.
About the pic, I don’t have any teeth so I don’t smile. I’m waiting on my gold grillz to come in the mail
Ok maybe not, I’ll be updating the pic soon, thanks for looking 
Gold grillz will be MAD sweet!
Samurai´s last blog ..Someone Always Farts In A Crowd
I don’t include home value or my mortgage in my net worth calculation anymore. It is only cash, I don’t consider my home an investment, just a place to live. If my home were providing me with an actual income like an investment property then I would include it in my net worth.
Kyle C.´s last blog ..How Long to Keep Tax Returns
That’s a very good point Kyle. I don’t consider my home an investment either, I wait to get out of it-we’ve almost out grown it. I only show the house because I’m upside down on it an I want to have a real amount tied to my debts. Including them all in one place helps me to visualize how far I have to go. I guess seeing it every month just makes me want to go that much faster. Even putting the car on there might not be worth much to some people because of leases.
I understand the different approaches on including the house. At the beginning, the house represents more than all your net worth. As time goes on, and your net worth is greater than the house, you can think of it as “if I sell everything else, I can pay off the house and still have $X more.”
Years ago I started backing out the house altogether, as that bottom line is my “number” the money that would support a retirement. That number needs to be between 10X and 20X one’s annual income to retire comfortably.
Nice article, Jeff.
Thanks for the advice Joe, I believe once my ship is righted I will be backing out the house as well. Cash value seems to be the theme among the Samurai, Kyle, and yourself. I will continue to focus on getting back to even so then I can really start investing in my families future. Fyi, Jane 2.0 is lucky to have you as a guide through her teen years.
Dude. that snowball graphic is hot! Good for you man, it’s all about putting it down on paper/computer? and holding yourself accountable
Although I must admit, I did win $2 in the lottery the other day….if i keep losing $5 to win that $2 I’ll be rich! haha…
Yeah, I love the graphic I just can’t remember where the idea came from. Oh yeah, I copied it from J. Money over at BudgetAreSexy I figure if you have a positive net worth that you track, I might as well track mine – even though I’m slightly behind yours. Only 200K to go
Look for another entry into the Millionaire’s Club coming next week…
Growing your net quickly means different things for people in different financial situations. But I do agree with you, that paying down debt is the most surest way into a positive territory. I myself have a positive net worth but my debt is dragging it down a little. Mostly because I do include everything, including my car lease, which does have a balance, even if I don’t own the car.
Keep at it, a pizza at a time, you will get there.
Yeah, net worth falls into the “Personal” Finance category. We all view it differently and use I differently. Since I have a long way to go, I use it to fire my a$s up to go out make as much money as I can. Other people can sit back a relax because they have a positive number. Even when I get there I don’t believe I’ll be able to sit back. I’m a hungry person and getting into the positive area of the curve will really get me moving. At that point I’ll be able to save for the businesses I’d like to get into (gotta pay cash though).
Just imagine how much more you’d be in the positive if you blasted that debt away. I’m sure since you are already in the positive you could blow it up super quick. Just something to think about.
Have a great weekend Mark!!!
Great article Jeff. There are obviously different ways of calculating Net Worth value, but I like your approach.
As a WordPress user, you might be interested in the Net Worth Plugin that we just released: http://www.creditcardfinder.com.au/net-worth. It is free to download and would be great to get your feedback.
Cheers
Hey AG, I came across you plug in the other day. I’m going to try it for my next net worth update and see how it looks.